Project Risk Management Evaluation - Essay Example

?Running head: Project Risk management Project Risk management Insert Insert Grade 16th March Project Risk management Mitigation of risk Mitigation of risk refers to avoidance of things that could lead to a problem reoccurring. Avoiding of risks is associated with strategies and plans that can be implemented to control the risk. First, the risk has to be identified whereby risk responses are agreed upon, then specific actions are agreed upon, and symptoms and warning signs are identified. The risk management plan is the second strategy, whereby people are assigned duties on how to control the risk, while time and resources are allocated to the management of the risk. Strategies to control the risks are identified, plans are established on how to deal with the risk, and the correct action is taken (PMBOK, 2008, pp 309). Risk audits are also carried out to examine the value of the risks responses when dealing with the cause of the risk, and how effective the risk management plan is. When conducting the risk management, trend analysis is used to monitor performance of the project. Technical measurements compare technical accomplishments during a project implementation to the project management schedule. Moreover, the technical performance can be used to compare the results of the management plan with the targets. In order for the risk management plan to be effective, reserve analysis is carried out to compare the amount of reserve that has remained to the total amount of risk remaining. In addition, the amount of time required to tackle a risk depends on the number of risks identified (PMBOK 2008, Pp 310). Project schedule slippage This term means the delay in the completion of a project from the estimated time scheduled for completion. A project can be delayed due to various reasons such as; lack of proper planning, re-doing of a particular section of work for some time hence taking over the expected time, lack of enough resources for a project to be completed on time, proper planning and willingness to carry out the task. A lot of time is wasted when resources, tools, and equipments run out of stock, thus the employees have to wait for delivery. Indeed, this wasted time is not accounted for. Another factor to consider is the time wastage due to un-inevitable event, for instant, the illness of a coordinator will require waiting until he gets better or hiring a new one who will take time to familiarize with the project. Schedule delay may cause problems to the owners and contractors of that project in that, the additional time added may amount to many unplanned added costs. Therefore, it is important for every project to be managed to a schedule (Hullet, 2009, pp, 1). Diagnostic metrics This metric is used to provide information on a system. Diagnostic metrics assess the situation of a system, detect any anomalies, and forecast on future problems based on the latest date. The root cause of a variance is usually determined via the use of metrics. With the cause of each variance identified, it easy to know what measures to take. After dealing with the main variance problem, it is easier to tackle related problems that will arise in the project (Kendrick, 2010, pp 278). However, “metrics can be used to detect changes, make performance and progress visible, evaluate progress evaluation, and trigger process improvements” (Kendrick, 2009, pp 237). Since incorrect activity duration estimates may push all personnel into work too early or too late, how can a Project Manager motivate their teams by learning more accurate estimating? First, a manager can match a task to an employee depending on his availability, such that, he is sure that the task will be completed within the agreed time. This strategy makes it possible for an employee to dedicate his effort on the assignment since the manager relies on him. Secondly, the manager may reallocate assignments to those employees who have fewer assignments. This creates a sense of equality among employees. A manager can also assign critical part of an assignment to the skilled employees and when they are through, the semi-skilled employees can tackle the less complicated part. This strategy leaves all employees with duties that they can handle best without complication, thus reducing the levels of delays (Heldman, 2005, pp174). In cases where employees need to work overtime, the manager should pay for their overtime since it is not the agreed working hours. He should also reshuffle the employees working overtime to avoid biasness. This will enhance motivation in workers and there is a greater chance of meeting the deadline. A manager should also ensure that resources are available before the project schedule so as not to waste time on waiting for deliveries. A manager can also implement the use of bar charts, which are easy to read, and displays the scheduled activities. These charts indicate the start date of an activity and its final date for completion. This is followed by resource assignment and the sequence of activities. The other method is milestone charts which show the events associated with the project start and end date. These tools help the manager keep the project on time tract (Heldman, 2005, pp178). On page 238, describe two areas of major risk in this RBS and what 3 methods of activity duration estimating could be utilized. Provide clear description of estimating method. 1 page The risks involved include lack of funding in an organization; in this case, funds are very essential in an organization and it is hard for any organization to run without funds. For such an organization to continue running, mitigation strategies are required. First, the organization may reduce on the number of employees by laying off a number of staff. This certainly means a lot of work with fewer workers. Hence, the management should introduce job rotation whereby each employee can tackle any job given to them from a related department thus reducing work overload and biasness (Heldman, 2005, pp174). In addition, when employees may be required to work overtime, the management should make sure that their allowances are paid. To avoid using many funds on overtime, the organization can re-shuffle the employees, for instance, those working overtime this week will be replaced by other staff next week. During this time, the management may be required not to hire in order to reduce expenses. The organization should also cut on the costs of training, meals, and entertainment at the place of work. With these measures, the organization may get on its feet once again. Nevertheless, the organization can try to introduce the Gantt charts and milestone charts, which are easier to read and state when an activity’s initial day and deadline is. With this type of charts, it is easier for employees to meet their deadlines, thus saving on funds that would require re-working on the same project (Heldman, 2005, pp178). The second risk involved is the performance risks in the technical area. When the expected outcome of a task is poor and unrealistic, clients most probably withdraw from such a service. While an organization is working towards a certain deadline to avoid delays, it is also important that it consider the quality of work submitted. First, a manager should estimate the quantity of work and decide on how to access labor. A manager may result to leveling as a strategy to keep time. In this strategy, he may decide to allocate work depending on the skills of his personnel. In this case, the critical jobs can be handled by the skilled expertise while the less complicated jobs can be handled by semi-skilled workers (Heldman, 2005, pp174). Sometimes, poor performance is caused by lack of motivation; it is hence the duty of the management to make sure that its employees are motivated. When performance is an issue, the company is at risk, this risk should be dealt with before it becomes a habit. Discuss why a key motive for risk management is the identification of opportunities that can change a project’s scheduling plans. Give at least one example from your assigned articles and/or textbook readings.1 page. Since a risk is any uncertainty that affects a project, there must be ways to mitigate the risk and avoid any further alteration in that project. Risk management is hence the process of minimizing further spread of a risk to a project or to an organization. First, a risk should be identified in order for effective plans to be put in to action, and tackle the risk. A risk is considered a threat to an organization and so it is the duty of project managers to manage such risk (Kendrick, 2010, pp 135). An effective risk management process results to an organized resource allocation and capital utilization, and an organization is able to improve on its decision making skills and planning methods. Moreover, an organization is able to anticipate problems that are about to arise and use effective mechanisms to handle them before they yield to a risk. When a risk is managed or mitigated, then this creates a possibility that re-schedule plans no longer exists. Risk analysis provides a manager with effective responses towards the risk (PMBOK, 2008 pp294). Implementing of a response to the risk is a step taken to minimize the effects of the risk and reduce threats towards a project. Since scheduling may be associated with risks that may arise due to some operations dragging behind, it is always a relief when risks are foreseen and dealt with before they affect a project. Risk management also provides information about some preventive ideas to increase the likelihood of threats. As a saying goes, prevention is better than cure, hence, on learning preventive measures that can curb a risk, minimizes costs and time that would have been used to assess and manage the risk effects. The key motive of risk management is the identification of opportunities that can change the scheduling plans of a project, in that, when risks are known and identified, it is easier to make responses to react to the risks. This prevents further damage, since a risk is perceived to be an uncertainty to a project (PMBOK, 2008, pp 275). An example of Red carpet Company that is contracted to build a business- aimed building. The owners of this building and the contractors agree on the cost of materials required, the cost of labor, and the time it will take to be complete. In this case, the contractors assure the owners that, in nine month’s time and without any delay in materials and with the cash needed, it will be complete. 3 months down the line, heavy unpredicted rainstorms thus forcing the construction to stop for about 3 weeks. In addition, the cement company declares shortage of cement due to the effect of rain. They can only deliver in small portions for two months until the problem is catered for. By the time the project gets to routine, the contractors are running out of time and have to speed up. The main problem is, the labor they had is not enough since things are heated up. They cannot hire more to reduce on the costs. Finally, they decide to have a schedule plan. Workers are forced to wake up very early in the morning and get from work very late. Workload also becomes an issue and some work has to be re-done due to its poor quality. Within no time, workers cannot cope if they are not given overtime allowances. Some workers even quit the job forcing the contractor to spend time and money enquiring for new skilled personnel. Expenses that were un-accounted for begin to rise, leading to a negotiation between the contractors and the owners. Nevertheless, the Red carpet contractors have end up implementing the use of over-allocated resource method. Heldman, (2009 pp174) Though both teams reach an agreement, the owners are very disappointed, since they are forced not to keep to the budget. If risk assessment and analysis were carried out from the beginning, there could have been some measures put in place. Thus avoiding the schedule plans since they are always associated with risks. It is hence relevant to state that risk management provide opportunities that change project-scheduling plans. Case Analysis Identify what you perceive are the key decisions Mexi Energy Inc. should take, based upon the Risk Management and Assessment models studied this semester. Then list the major constraints, formatted into a “Conditions for Impact Scales” risk probability table Mexi energy Inc should first make sure that they have enough funds for the uncertainties for instance, for the gas supply company that requires take or pay contract, Mexi energy should take their deal. That will involve paying for the gas, whether they use it or not, or outsource for another company that can provide gas only when they need it. In order For Mexi Energy Company to be on the safe side, and avoid any project reschedule due to delays or ineffectiveness of equipment, it would rather go for the state of art-tested design, which despite very high capital cost, it has low maintenance costs and high fuel efficiency. Since California energy provides grid connections, and the plant could be delayed due to climatic changes, Mexi Energy Company should make sure that its project starts the time the plant is available. The company can also purchase a generator, incase power runs out. Mexi Energy Company should also be prepared for environmental changes that may cause rise in prices of water supply, low-pressure steam connections, and emergency power connections. The company should also undergo legal procedures to avoid problems with the municipality due to negligence of approvals especially on safety issues. Constrains that are involved with this project include additional costs due to environmental changes; constant delays of the constant black-out once the back ups fail; limitation of outsourcing as monopolies emerge , for instance, California provider of grid connection. Defined condition for impact scale Project objective Very low low moderate High Very high Cost Insignificance cost increase 2% increase Not moderate increase 5%Relatively high cost increase 50%cost increase Time Insignificance time increase - - - 20% of time increase Delays Insignificant delays - - - 5%Not high level of delays quality Insignificant level of quality - - 20% relatively high quality of project tools. High quality of art tested designs monopolies Insignificant noted - 10% of presence of a monopoly Relatively low Not very high of monopoly present Identify what you perceive to be “risk aspects” which could be quantified in order to provide appropriate risk tables to Sam for analysis and later managerial review. List quantitative methods and explain how these could be used in order to quantify risks facing MexiEnergy’s plans. Quantitative methods are used to analyze the quantity of the identified risks. “Hence risk quantifying is a process of evaluating risks that have been identified, and developing the data that will be used for decision making on the measure to be taken.” Newell M, et al (2004 Pp181). The main aim of quantification is to re-arrange the risks starting with the most important ones. Once the risks are identified, various tools and techniques are used to analyze them. They include; data gathering technique, risk analysis, modeling technique and the expert judgment technique. In this case, we already have the company’s risk at hand; data collection enables us to be able to analyze the risks. The risks facing Mexi-company are as follows; One the major risk aspects to Mexi energy plans is the financial constraints that will come about due to the added costs that are unpredictable as a result of climatic change. Another risk is the power blackout, which is unpredictable, incase the backup plans fail; this could be a major threat to Mexi’s operational plans. Delay is another factor that arose as a result of a monopoly company that is the only service provider for the plant. In case there are delays, Sam’s company has to postpone its plans until the plant arrives. Another factor is the issue of gas provision, which requires pay of the gas on delivery whether it is used or not. This could end up to unnecessary costs incase the gas is not used at all and it was paid for. The other challenge is seeking approval for almost everything Mexi Company is implementing, starting with the plant to safety issues. A problem may arise if, by any chance, the municipal does not approve one of the items. Having already had data on the risks affecting the company, the second technique is risk analysis and modeling technique. This technique analysis the most important risks first. Therefore, by use of sensitive analysis, we can be sure of which issue is sensitive and needs more attention. “The expected monetary analysis calculates the average outcomes when some scenarios that are predicted, may not happen. It is calculated by multiplying each of the possible outcomes with the probability of the occurrence and then adding the products together” (PMBOK, 2008 pp 298). In this case the risks predicted is the additional of funds incase there is blackout and unnecessary funds if the gas Mexi Company purchased is not used. The other tool is modeling and simulation, “it uses a model that translates the specified uncertainty of the project, in to their potential impact on project objectives” (PMBOK, 2008 pp 299). In simulation technique, the project is computed through cost estimates and activity duration. The expert judgment is the final tool that relies on experiences. This tool is supposed to bring up scheduled costs to evaluate probability. In Mexi’s case, delays in plant delivery, which has re-occurred over the years, could yield to added costs that were not budgeted for. This technique however may quantify this risk. Based upon your understanding of Ch.6 in the Kendrick textbook, what schedule modifications, crashing or (Ch.4, pp.94-96) schedule convergence or interfaces could you create for Mexi- Energy? Schedule convergence in a project represents scheduled risks. Since Project work is due to stop when any activity is pending, each addition plan represents additional mode failure, thus increases the chances of delays. To identify schedule risks, the company should determine the root causes of all uncertain estimates, note the interfaces that could cause delays identify risk activities and schedule them early during the project, and identify and avoid the risks associated with lengthy projects (Kendrick, 2010, pp 95). Working with this schedule will minimize re-works. Crashing involves addition of resources from within the organization or from outside, and it could also involve automatic overtimes to keep to the schedule. In addition, it incurs excess costs for the project. In conclusion, the schedule convergence seems to be the best schedule modification for the Mexi- Energy Company. References Hullet, D, (2009). Practical Schedule Risk Analysis. Burlington: Gower publishing Ltd. Kendrick, T. (2009). Identifying and Managing Project Risk: Essential Tools for Failure-Proofing Your Project. NY: Amacon publishers. Kendrick T. (2010). Identifying and managing project schedule risks. (Attached material). PMBOK. (2008). Risk management. (Attached material). Heldman. (2009). Creating the project schedule. (Attached material). Newell M, and Grashina, M. (2004). The project management question and answer book. Amacon publishers. Read More