Project Contingency Planning and Risk Assessment - Case Study Example

Project contingency planning and risk assessment Introduction Within a wide variety of organisations today there are specific projects which will require the efforts of individuals in the business as well as multiple members of the organisational staff. The majority of projects are designed to increase business profitability, expand the business’ operations, or merely create both internal and external business improvements which secure the longevity of the firm. When planning projects, various risks to the business and the specific project must be identified in order to create a series of contingency plans in the event that disruption occurs to the business or the project plan. These risks can include any number of incidents which will erode profitability, cause financial setbacks on the plan or even create negative perceptions about the business in the social community. This paper identifies the importance of risk assessment and contingency planning surrounding project goals and how specific project-related issues can impact the dependencies of the initial project plan. Assessing the project plan Whatever the nature of the specific project at hand, there are going to be a wide variety of different risks to the initial project design. For instance, a business project in a manufacturing environment which entails a restructuring of raw materials supply will maintain issues such as costs involved in distribution, feasibility of tangible manufacture, or even supplier relationships being affected. A business which maintains a project designed to increase positive public relations, such as a complicated marketing plan, will maintain many different potential risks including the creation of negative consumer sentiment or excessive promotional costs. Hess Corporation, a large enterprise, recently began a project plan which involved the creation of a new information technology pipeline to serve the business’ multinational needs. As part of preliminary planning, Hess Corporation divided the project into three specific categories. First, the B-Initiative outlined the steps necessary for the information technology pipeline to bring financial value to the company, such as identifying costs associated with various software packages. The P-Initiative was also undertaken as a means to identify potential risks to Hess Corporation in terms of processes when making improvements to the technological infrastructure at the company (Hoffman, 2008). As part of preliminary project planning, subdividing activities based on their potential long-term value to the company allowed the business leaders to create a variety of contingency plans in the event of any unintended disruption to the existing information technology infrastructure. Planning a new project requires understanding the nature of the business and the environments in which it thrives. For project planning purposes, it is important to utilise the PEST Analysis, an acronym for political, economic, social and technological forces which can impact project plans. A project is not created in a vacuum, which means that people must consistently work together to fulfill the project’s goals, including both internal staff members and the external community. A multinational business, for example, will have significant dealings with the foreign political forces which regulate foreign businesses (such as tariff restrictions or import limitation). The business will also deal with the financial strength of the foreign country and the wealth capabilities of the local citizens, especially important for businesses which are trying to sell product to mass market consumers. Social forces, such as whether a product would even be desired in the foreign country, will also impact the ability to plan and control a new project in the multinational environment. If the PEST Analysis uncovers issues with changing wealth patterns, as one example, in the project environment, there must be a plan in the event of diminished sales volumes. For instance, the initial project plan may require the construction of a new distribution facility in an overseas market in order to supply products to the foreign consumer. As part of the project’s initial strategy, the project plan might have a plan developed for a specific marketing approach to create connection with different, foreign consumers. However, when changing wealth patterns are identified, this represents a significant risk to the business’ long-term profitability expectations, thus a contingency must be developed. Planning a contingency in this case might involve the creation of a back-up marketing positioning plan so that the image of the product can be changed instantaneously when sales declines are observed. Recognizing external factors, such as regional economic forces, will provide the project plan with new marketing alternatives in the event of total marketing project failure. Governmental leaders, as well, consider risk assessment and contingency planning as a means to highlight all aspects of a project plan. In the United States, the Utah government developed a sound Risk/Value Assessment Model designed to analyse potential risks to scheduling plans, team and human resources risks, technological risks, financial risks, as well as the risk of simply abandoning the original project plan (Utah Government, 2006). This model has brought significant value to governmental leaders as it creates a system of risk value, generally from 1-5, with one representing the least amount of risk in each project category. The risk assessment model utilised will create a weighted score on each risk variety, determining what steps would be necessary to combat any non-value-added scenarios which can erode the success of the governmental project. Resource availability is yet another significant factor in project planning, as whether the resource is tangible or human resources-based, inability to procure necessary resources will hinder project plans. Consider a hypothetical company which has determined that the most financial value will come through streamlining manufacturing. Such a plan will require new machinery, new raw materials, and perhaps even different schedule and labour requirements. Careful strategic planning, such as with the PEST Analysis template, will determine whether resource availability is sufficient and provide the contingency plan necessary in the event of resource depletion. For instance, it might be discovered through research that a particular, very important supplier with tremendous supplier power is facing a hostile takeover by a very different corporation. Though at the time of the project’s implementation there will be adequate resources necessary to fulfill the project’s expectations, there is the risk of political or economic instability when (or if) the supplier is no longer operating independently. This would provide the opportunity to locate different suppliers in the event of resource disruption or to approach the potential buying company to create a relationship to ensure that supply will be delivered regardless of the takeover. In more serious business situations, identifying potential risks is paramount especially if the business faces considerable resource restrictions mid-project. Karakasidis (1997) offers the business recovery plan project as a means to radically alter the nature of how business is conducted, reinforcing the importance of recognising all potential risks before launching the strategic plan. A business recovery plan is necessary when the existing business model no longer brings measurable value to the business. Risks to this type of complicated business recovery plan can include both internal and external forces and the necessity to create multiple contingency plans in the event of business disruption. If the business is teetering on the verge of failure, identifying potential risks becomes the primary foundation of project planning and it would be healthy for the business to consider an overload of potential contingency plans to ensure the project is viable and uninterrupted. Controlling the project once the plan has been decided and implemented involves several key dimensions, including maintaining an authoritarian attitude, being present in multiple project functions and setting specific benchmarks by which staff members should be expected to comply. For instance, consider a senior executive who had determined that a new software system is required to sustain competitive advantage, streamlining all business functions into a single software package. In this scenario, information technology support, finance, human resources, payroll, marketing, shipping and receiving as well as many other divisions will be required to give input and make contributions to the project’s success. Motivating others to comply with strategic project expectations will require the intervention of the project planner in order to bring success and value to the project. Maintaining control means setting specific deadlines and ensuring that those responsible for their individual contributions will report back with information regarding progress. In order to keep everyone in the business focused on their individual tasks, informative communications designed to offer positive (or critical) feedback is necessary from the planner level. Theories of organisational behaviour and culture are highly relevant in maintaining control over projects, as many people in today’s businesses are only motivated to perform if they believe they will be rewarded or if they find personal value in the project (Landy and Conte, 2006). Abraham Maslow, a renowned psychological theorist, also suggests that it is crucial to establish a sense of belonging in staff members before they can actually achieve the pinnacle of their success capabilities and motivations to perform (Morris and Maisto, 2005). Controlling others in the project phases, then, requires the planner to utilise theories of psychology and motivation by appealing to the human desire for recognition for their unique accomplishments and contingency suggestions. Failure to recognise individuals in the organisation as being valuable human resources will likely lead to a break-down in control and cause the project planner to utilise undesirable authoritarian command in order to drive productivity. This is something which would create animosity amongst the organisational staff and will likely become a risk in terms of ensuring productivity and focus toward the project goal. Contingency plans, according to the National Association of Broadcasters (2008), involves setting a specific statement of purpose, a strategy for preparedness, effective implementation of the alternative plan and constant review of progress. This suggests that the contingency plan must be outlined with a specific objective in mind as well as recognising the ability to coordinate staff and business to reach the contingency goal. The statement of purpose is likely the motivational factor in terms of organisational behaviour by allowing others to feel a sense of belonging and purpose toward the project plan. Effective implementation of the contingency involves understanding which individuals in the business will be most effective at assisting the forward plan and communicating/delegating responsibilities in the event that a contingency plan replaces the original project plan. The review process, in addition, allows the project planner or executive-level leader to become active in the entire project plan to reinforce to others that the planner intends to maintain tight controls and will be measuring performance accordingly. In an environment with a top-down hierarchy of command, project plans and the development of contingency plans will maintain less risk of the project planner dictates how the process is to be regulated (controlled). Conclusion There is no singular, definitive model of risk assessment and the necessity for contingency plans in project planning. Assessing the internal and external environments so as to understand both the capabilities and difficulties of implementing a project plan appears to be the first step to quality project planning. Recognising individuals in the organisation as valuable and necessary components to the project plan, and utilising theories of motivation and psychological satisfaction are also methods to control the process of the project and create a more value-oriented organisational culture willing to perform to strategic expectations. Whenever risk is identified, there is the necessity to create back-up solutions in the event of business disruption or a failure in meeting project goals. These contingency plans will be unique for each individual business or project focus, however it would be highly irresponsible for a project planner to develop a plan of action with no thought toward whether the plan is feasible or within cost restrictions. Using an appropriate risk assessment model, the project planner can identify any areas of potential hindrance to the project and create solutions if the project is forced to move off of its intended purpose or objective. Any good business leader or project planner will create contingency solutions and must work to control process functions if they hope to achieve a successful project outcome. Bibliography Hoffman, Thomas. (2008). “Building an IT Project Pipeline”, Computerworld, Framingham. 42(15): 34-36. Accessed 1 Dec 2008 from ProQuest Database. Karakasidis, Kon. (1997). “A project planning process for business continuity”, Information Management & Computer Security, Bradford, 5(2): 72. Landy, F. and Conte, J. (2006). Work in the 21st Century: An Introduction to Organisational and Industrial Psychology, 2nd ed. Blackwell Publishing. Morris, C. and Maisto, A. (2005). Psychology: An Introduction, 12th ed. Prentice Hall. National Association of Broadcasters. (2008). “Contingency Planning Overview: Radio and Television Broadcasting Stations”. Accessed 1 Dec 2008 http://www.nabinsurance.com/Risk_Management/rm_ContingencyPlanning.jsp Utah Government. (2006). “State of Utah Risk/Value Assessment Model”. Accessed 1 Dec 2008 http://www.governor.state.ut.us/CIO/Docs/Model.PDF Read More