Risk Management in Enterprise Resource Planning Systems of Microsoft Dynamics GP - Essay Example

ERP risk and risk management Affiliation ERP Risk and Risk Management Organizations and s have been adopting the modern technology in their operations through utilization of programs and software that enable them to work effectively. Enterprise resource planning software is one of the significant management programs being utilized by organizations. Organizations and enterprises are heavily investing in the modern management information systems for the purpose of increasing output, attaining competitive advantage over competitors and establishing effective management and control strategies. Microsoft Dynamics GP is one of the best management information systems under the enterprise resource planning systems category. The system is beneficial to an organization because it performs a wide range of activities (Sumner, 2000). However, application and implementation of the enterprise resource planning system face various risks in organizations. Therefore, proper management of risk is vital for effective use and implementation of the ERP management system. Risk management is essential for the identification of possible risks that may affect the ERP system, strategic planning for activities with few risks and efficient mitigation of risks. The risk management process comprises of several phases as highlighted by Aloini et al. (2007). These stages include context analysis, identification of possible risks, risk analysis, risk evaluation, treatment of risk and communication and consultancy. According to Sumner (2000), there are various predominant risk factors that face organizations during the implementation and execution of activities using the enterprise resource planning system. Major risk factors identified during implementation of the ERP system include skill mix, software system design, management strategy and structure, organizational fit, user training and involvement, social commitment, project management and technology planning. Findings from research carried out on risk factors present in ERP systems reveal that organizations face several risks. The first risk factor identified is failure to redesign effectively or restructure business processes to fit the ERP software. Project managers in the organization apply their experience to avoid customization. Failure to customize of restructuring various business processes in the organization results in a conflict between the ERP system and the company. Consequently, the project executed may collapse and fail to achieve its objective. Secondly, organizations face a risk factor of having insufficient reskilling and training. Although organizations invest heavily in acquiring a management information system such as ERP, some of them are reluctant and unwilling to offer or fund trainings on the enterprise. Insufficient reskilling and training on utilization of the ERP system puts organizations at the risk of failure in the future. Thirdly, small and new organizations face a risk factor of inability to recruit and retain specialist developers in ERP systems. The risk factor may prevail due to high rates charged by professionals causing a failure in the project execution. To mitigate or manage the risk factor, organizations should offer training or fund trainings to their employees in order to gain adequate skills and knowledge of handling the ERP system (Sumner, 2000). Inadequate training of the end-users is also a key risk factor in the execution of enterprise resource planning system. End-users or beneficiaries of the ERP project in an organization require proper understanding and knowledge of the utilization of the ERP system. Failure of providing training on the system may result in resistance from the end users, thus leading to the collapse of the project. The risk can be managed by holding several learning sessions to the end-user or advertising relevant information on ERP systems. Lack or absence of a project champion is also a risk factor the faces effective implementation and execution of ERP system in organizations. A leader in the ERP system directs, plans, controls and evaluates the performance and functionality of the ERP system. In the absence of a champion or a leader with adequate knowledge and skills on the ERP system, the project may not work efficiently. A champion ensures that the system is active and beneficial to the entire organization. In addition, a champion participates in marketing of ERP systems to others. According to Alioni et al. (2007), bad managerial conduction is an important risk factor in the poorly managed organizations. The management standards of an organization determine the performance level and effectiveness in application and implantation of new technology and innovation. If the management has poor standards and is ineffective, implementation of a new management system is likely to face challenges in the execution of managerial activities. For this reason, organizational management should be effective, technologically ambitious and well equipped with the ERP management system. Inability to acquire a customer’s commitment to project activities and management is also a major risk that may have adverse effects on organizations employing ERP system. The system requires customers or the end users’ commitment by the organization’s employees. Managers may be less committed to running the ERP system due to his or her responsibilities in the organization. As a result, the organization should recruit dedicated personnel who will focus on customer satisfaction and service. Lack of integration is a risk factor for execution and implementation of an enterprise resource planning system in institutions and organizations. In respect to the management of an organization, ERP system must be integrated with all activities of the organization. In addition, all employees and partners must be informed about the system and its importance in the organization. Failure to integrate the system may lead to partial and poor performance of the system thus may result in failure of the system (Alioni et al., 2007). According to Bluemner (2013), operating with outdated and unsupported software possesses a risk on utilization and performance of the ERP system in any organization. Unsupported and outdated devices and software may cause the enterprise resource planning system and other management information systems to crash and lose valuable information concerning the organization. Therefore, the user of devices and software must ensure that they are updated and always supported. Lastly, lack of compliance with the existing security laws and standards is a key risk factor. Organizations should ensure that they fully comply with security standards in order to utilize the ERP system legally and efficiently. Violation or failure to comply with security standards may result in data loss through closure of the system or even result in the accusation by law. Therefore, it is important to comply with standards effectively to reduce risks associated with ERP system (Bluemner, 2013). There are many companies using the Microsoft Dynamics ERP system in management activities. For example, eSoftware Professionals applies the Microsoft Dynamic ERP system in its management and provides consultancy to other companies on application of the ERP system. The company considers various risks and risk management procedures discussed above for its effective functioning and management. Application of the ERP system enables the eSoftware Professionals company to gain competitive advantage over its competitors and saves time and resources in management. In conclusion, organizations and institutions that adopt ERP systems in their managerial activities should carry out a detailed contextual analysis of possible risks that may affect the system. In addition, the organizations should identify major risks and determine their effect on the performance and functionality of the ERP system. Risk analysis, evaluation and proper communication and consultancy should be carried out to understand the effects and magnitude of the risks. A strategic plan should be developed for mitigating these risks from affecting the system negatively. References Aloini D., Dulmin R. & Mininno V. (2007). Risk management in ERP project introduction: Review of the literature. ScienceDirect. Retrieved from http://cas.uah.edu/guptaj/m680/erprsikmagt.pdf Sumner M. (2000). Risk factors in enterprise-wide/ERP projects. Southern Illinois University. Retrieved from http://www.siue.edu/text/business/cmis/msumner/pdf/RiskFactorsERPSumner.pdf Bluemner A. (2013). 5 ERP security risks to be aware of. ERP software blog. Retrieved from http://www.erpsoftwareblog.com/2013/10/5-erp-security-risks-to-be-aware-of/ Read More