Key Challenges of Risk Management - Term Paper Example

 «Key Challenges of Risk Management» Risk Management Introduction Project risk management involves the identification of potential hazards that can arise during the course of a specific business activity involving multi-dimensional directions and strategic goals. Risk management has become somewhat of a paradigm in business, affecting tiers of leadership and individual staff job role function with corporate governance systems and executive leadership forced to consider the whole of the organization’s operations in order to create a meaningful long-term strategy. The interconnected nature of junior level staff with mid-management are inevitable consequences of achieving project success, therefore over-complicating the human-generated risks that can derail a project without an assessment of risk. What is risk management, then? It is understanding the role of each division that works in conjunction with achievement of project goals and developing effective strategies by which to combat issues with team cohesion, how best to deliver change practices and having a sound understanding of internal operations and how they are impacted by externalities of changing dimensions. Risk management is recognizing both internalized and externalized threats to achieving project goal success by analyzing the business environment and identifying opportunities for correction or reduction. Risk management will be discussed in relation to project leadership and the impact of R&D, change management needs, information technology, and human resources. Key challenges of risk management Outsourcing is becoming a common business practice, as globalization becomes the reality of expansion and foreign labour becomes necessary to sustain operations amid a foreign direct investment. Commitment to achieving corporate goals when project outsourcing with external expertise becomes a significantly paramount executive concern. There are cultural dimensions that must be considered that will impact the interpersonal relationship and the business relationship. Outsourcing financial services from India, as one relevant example, might achieve commitment by design simply with the label of professional finance workers instead of being forced to work in a small, Indian finance office (Northrop 2010). Commitment, in this case, is a product of stature and a better quality working environment, thus commitment risk is virtually non-existent. However, an internationally-sponsored project event entailing direct foreign assistance, outsourced for budgetary issues, leads to ethical concerns and communications/cultural barriers that will slow project momentum. “Twenty-first century management must ensure the health and resilience of their company’s culture to successfully manage and overcome the daily ethical questions that arise across all levels and layers of the organisation as first priority” (Rossi 2010, p.816). This provides evidence that relationship-oriented risks will occur as a daily course of business, building priority for identifying potential risks in order to manage substantial diverse staff interactions. There is even evidence provided that the activities of decision-makers in governance positions will be perceived and analyzed, thus changing staff commitment to achieving project goals. “A lack of alignment in transparency, accountability, and responsible behaviour…leads to cynicism, alienation among employees…silencing them into disgust, disbelief, or incomprehension” (Verhezen 2010, p.189). Human dimensions and the current state of organisational culture and executive leadership will impact staff motivation to achieve mandated project goals. Besides the basic responsibilities of blending finance strategies and expansion opportunities (or divesting in poor performing industries), governance in project leadership requires knowledge of foundational human relations strategies and how to isolate impending or concurrent risk in special project groups. Bryson and Blackwell (2006) identify that HR strategies often do not take into account staff diversity and individual aspirations, nor incorporate the knowledge and needs of operational management into strategy, thus providing ineffective people management policies or processes. So, what are the key challenges in risk management in relation to special project leadership and corporate governance? A foundational understanding of what drives behavioural elements in job role and amid social networks is required in these roles. Risk management is scanning this internal environment, in regards to social cohesion and cultural disconnects, and creating strategies or policy modifications to enhance perception, self-image, corporate reputation, and organizational unity toward meeting project expectations. Specific risks with R&D The role of research and development management is that of technology portfolio management, including a group of products and projects (Igartua, Garrigos & Hervas-Oliver 2010), then deciding which are worthy of pursuing based on a variety of matrix comparisons or model benchmarking. This is the blueprint stage of new product development, thus considerations would also include intellectual property concerns, budgetary issues with operational strategy, and competitive timeline to market if the new innovation or product-related project can sustain a long life cycle. In research and development phases, outsourcing or new technology partnerships can occur as a matter of a corporate-wide strategic alliance, acquisition or long-term international systems integration project with global consequences to profitability or growth. Certain partnership agreements, when working on research and development of new products with collaboration, can be loosely defined, consist of formalized development contracts, or consist simply of loose strategic goals when partnering (Tho 2005). Risk management is understanding the connection between long-term profitability upon success of the research and development project and considering whether to legally formalized agreements for liability prevention or to continue forward with undefined, sporadic interaction with internal and external R&D staff members. Trade secret protection then becomes a paramount risk, leaving executive-level decision-makers to determine the foundation of the acceptability of loose relationships or formalized contract interactions with knowledge personnel. Change management and technology transfer In change management for project leadership, much of the data must be inferred by noticeable trends in corporate governance. New projects require new transformations to existing operational models; whether production models or service models. In any event, it becomes a new practice of performing internal job role function that can meet with staff resistance. This resistance is not as important in terms of behavioural change as it is to the collaborative clusters that are thrust upon new team members of team leaders. Network alliances are becoming more commonplace as they “cultivate knowledge” and “push technology forward”, creating a new variety of technical interdependencies with sudden reliance on others for resources, information and socialization (Ogilvie & Jelavic 2010, p.20,23). The individual worker or manager capacity to cope with changes to daily performance expectations in a collaborative group represents a risk depending on the level to which group members or leaders can adopt peer suggestion. Thus, at the senior level of the organisation in governance roles, the impact of middle-management and subordinate interaction impacts strategy regardless of its technical or profit-minded sophistication. Most would likely consider that project leadership involves largely (or singularly) assessment of time, scope, cost and quality as the goal of governance officials. However, “project risk management is most effective when conducted early in the life of the project and continues throughout the entire project life cycle” (dot.ca.gov 2007, p.12). The interactions between mid-level managers and staffers assigned to project teams is an ongoing risk assessment tool that must be considered since the motivational or non-professional outcomes of these interactions will impact cost, quality and time. In relation to technology transfer, it is routine at larger-sized organisations and represents further incorporation of business alliances and partnerships for sustained competitive advantage. In a case study involving a specialized market partner, Servowatch, marine systems integration company, Servowatch equipped crew members on superyachts with radar systems, communications systems, and navigational software (Howorth 2010). Integration of these systems involve similar interactions with non-project personnel, thus opening risks potential to include misunderstandings at the cultural level, misgivings about project expectancies, or change resistance that cannot be controlled with internal leadership as it pertains to non-corporate staff members. In this case, corporate governance officials are physically distanced from these activities as strategists, thus not able to witness the social and non-professional nuances that develop in special project teams. The University of Portsmouth (2010) indicates that two common sources of risk include teamwork and politics. Integration of multiple software packages as part of technological transfer with a non-corporate entity opens risk potential that could entire throughout the entire project’s life cycle. This puts the needs of external business professionals as important considerations for time management, project budgeting, and long-term relationships with the second party depending on perceptions of effectiveness, efficiency or collaborative talents. In scenarios where high-yielding technology is being transferred to a second party, considerations of the effective exchange of knowledge must be considered as part of risk management strategy. Knowledge management risks include unauthorised use of intellectual property, competitive technology development, or loss of key staff members critical to project completion (theirm.org 2002). Whenever the corporate environment and internal representatives are forced to work collaboratively on project development and new product launch, the majority of interactions occur at the mid-level range. Exchanges of knowledge are then controlled by non-governance officials and mitigated by individual assessment of the relationship between internal and second party technology recipients. This becomes a senior level project risk as it is unrealistic for governance officials to be present to mediate peer disputes, customer complaints regarding support staff efficiency, or other concerns that arise during the regular course of mid-level interactions. When transferring technology or working in project teams with second party representatives, information technology systems integration has measurable risks. Risk assessment by project leadership involves security of these systems for corporate needs or client needs depending on the scope of the special IT project. “Typically, system security requirements can be presented in table form, with each requirement accompanied by an explanation of how the system’s design does or does not meet security control requirements” (Stoneburner, Goguen & Feringa 2008, p.23). Analysis of this quantitative data is occurring at middle levels of the organisation in most instances, since corporate governance leadership involves multi-tasking to include face-to-face representation, policy formation and financial regulatory activities. There is an over-reliance on mid-level talent that poses a risk with high-level control issues such as security integrity that is being conducted through mid-level analyses of charted information or statistical representations. In most information system projects, leaders are not using a great deal of quantitative analysis or software risk management tools. “They use templates and professional judgment usually” (Tse 2009, p.15). Can corporate governance officials rely on the accurate judgment of mid-level professionals and ensure that senior-mandated goals are being considered effectively? This is a question that should be asked in order to identify what potential risks might be involved with mid-level analyses and their capacity to make decisions that will impact long-term profit goals and successful product launch in the event of research and development projects. A pragmatic mid-management team assigned for security analysis poses potential risk, thus staffing and individual manager role capacity becomes a senior level project leadership risk scenario. Creating new risk management strategies The University of Portsmouth (2010) reinforces that there are five specific steps with which to mitigate potential risk when it is discovered or perceived. Prevention of risk is one action involving preliminary investigation into a variety of knowledge-bases to identify potential conflicts with relationships and any obstacle to cost, time or project scope. At the fashion retailer Zara, as offered by Ferdows, Lewis & Machuca (2003) the supply chain involves a rapid replenishment mentality, as part of fast fashion retailing with both production and distribution affected. Zara is completely reliant on this replenishment as it is tied to its marketing principles and business differentiation strategies. At the business level, this company sells exclusive designs, therefore rapid inventory exchanges are part of the business model at the operational level . Risk in this type of situation is supplier related in regards to efficiency and ability to deliver on negotiated supply agreements, the motivational behaviours of committed employees both outsourced and internal and rapid response to inventory control issues. Northrop (2010) had reinforced problems related to outsourcing, which is generally the corporate model in the supply chain, related to the committed versus non-committed foreign outsourced employee. In this case, on the risk mitigation model, this type of risk cannot be transferred but is a product of regular business practices and need for raw supplier product. A recommended risk management model is preventative risk management, through identification of human resources deficiencies and relationship management practices. It was identified that corporate governance officials work within dynamic environments where human behavioural responses and committal levels are increasingly important to meeting long-term strategic goals. Primary risk parameters are the probability that initial time and cost will be incurred with project team disputes or the perceived level of impact that cultural misunderstandings might provide. A proper risk management model identifies potential relationship-oriented risks to group collaboration and ensures motivational elements are provided by leaders specialized with these talents. This could occur in preventative analyses or be risks that businesses are willing to accept under the same risk mitigation model. However, there is a linkage between the role of corporate governance, human resources, operational mid-level management, and overall project strategy. Since each organisation is going to have its own management and organizational policies and procedures, the evidence provided would suggest that this best be approached with a preventative strategy of HR assessment at the very early stages of the project life cycle. Risk sources are also identified by the University of Portsmouth (2010) to include complexity and integration. In relation to project leadership, the role of collaborative environments along with complex social networks required for advanced projects has been discussed. When planning scope of a project, in the early stages of development, corporate governance officials are building complicated systems that oftentimes require consolidation of roles or a merging of divisional business expertise. This makes the potential risk unpredictable as it would arise in the process of group meetings, brainstorming sessions, or during collaborative testing scenarios. The risk mapping process involves finding risk and then assessing its severity and frequency. Solving unpredictable problems as they arise negates preventative risk management and shifts toward contingent planning (an alternative project strategy) or finding methods to reduce the identified risk. A recommended model is to scan the environment of mid-level expert collaborative environments and measure the probability that it might not be corrected with current mid-level management knowledge and skills profile. It was identified that mid-level management play a significant role in project launch and physical momentum development. They are forced to work under the pressure of new alliances and new job responsibilities as project coordinators or group leadership. In this type of scenario, considering transfer of risk as a strategy involves a shifting of leadership at the mid layers to another internal division or as an outsourced representative. Development of mid-layer character and talent profiles is recommended as a contingent risk mitigation strategy that ensures proper alignment between mid-layer managers who can perform complex analyses and manage the social networking environment. By understanding key roles and their tested performance levels, a template can be created that periodically scans the project environment to ensure that staffing is coordinated to the satisfaction of corporate governance teams. There should be bottom-up reviews conducted as a guidance for risk management (University of Portsmouth 2010). The evidence provided indicated a need to include human resources personnel and operational control managers in order to maximize project success. Projects involving transfer of technology have legal guidelines to drive intellectual property, however the mid-tier management makes the majority of day-to-day business decision-making, thus expanding beyond just the HR and operations roles. The template of mid-layer talent works also as a preventative risk management strategy without necessarily the need for ongoing contingent measures or just accepting the risk associated with collaborative project teams. Rossi (2010) reinforced that corporate governance officials are to balance the organizational culture and take into consideration its strengths as first priority. In this case, it is human capital that is the strength or weakness in risk management planning and to mitigate or create contingencies would seem to rest in understanding that mid-level decision-making capacities. The common role of middle managers in Germany, Italy and Great Britain are to “maintain a positive social environment and to handle exceptions and solve unexpected problems” (Delmestri & Walgenbach 2005, p.197). Both situations were discovered as potential risk situations as there is such a heavy emphasis on the interactions between diverse group members and the element of surprise associated with unpredictable project risks. Mid-level management assessment templates would look to be a business priority in order to prevent, mitigate and build alternative processes to circumvent it. Can risk management be taught? There was considerable lack of emphasis on the ability to control learning with project leadership or governance officials at the organisation in order to maximise better risk identification talents. However, building a contingency plan in risk management in the event of human-related failures that occurred unpredictably must entail the need for project leaders to become more actively involved as authoritarians. A lack of alignment with governance transparency and accountability was identified by Verhezen (2010) as causing significant, measurable changes in employee attitude. Contingent risk mitigation would be recommended to improve staff perceptions of senior level competence and authority and imply accountability to unify direction to high performance from employees. Though this would not be a contingent strategy in the event of human-resources problems with collaboration, the impact of governance leadership in the project reinforces commitment and meeting time expectations. The skills necessary to perform an authoritative stance should be well-developed academically prior to gaining a governance position, thus they are likely taught. Conclusion The largest learning lesson identified is the level to which human interaction is necessary in order to launch and control a successful project. Technology transfer and group collaborations are common in large-scale organisations, thus risk includes legal liabilities and less obvious social networking outcomes. The key situations that pose risk to project governance, as identified through research, are interdependent on multiple internal and external staff interactions and resource exchange. These are activities occurring outside of the governance meeting table, but have been identified as top governance priority. References Bryson, C. & Blackwell, R. (2006). Managing temporary workers in higher education: still at the margin?, Personnel Review. 35, 2, pp.207-225. Delmestri, G. & Walgenbach, P. (2005). Mastering techniques or brokering knowledge? Middle managers in Germany, Great Britain and Italy, Organization Studies. 26, 2, p.197. Dot.ca.gov. (2007). Project risk management handbook – threats and opportunities. 2nd ed. [online] http://www.dot.ca.gov/hq/projmgmt/documents/prmhb/caltrans_project_risk_management_handbook_20070502.pdf (accessed October 17, 2010). Ferdows, K., Lewis, M. & Machuca, J. (2003). Case study: Zara, Supply Chain Forum. 4,2, p.63. Howorth, M. (2010). Technology transfer: Navies are rich source of men and machines, FT.com. Sept 21. Igartua, J., Garrigos, J. & Hervas-Oliver, J. (2010). How innovation management techniques support an open innovation strategy, Research Technology Management. 53,3, pp.41-50. Northrop, A. (2010). In charge of more than just the purse strings, Scottish Business Insider. October 8, p.58. Ogilvie, K. & Jelavic, M. (2010). Social networking mapping and analysis in the global aerospace industry, The Canadian Manager. 35, 2, p.20-23. Rossi, C. (2010). Compliance: an over-looked business strategy, International Journal of Social Economics. 37,10, p.816. Stoneburner, G., Goguen, A. & Feringa, A. (2008) Risk management guide for information technology systems, National Institute of Standards and Technology U.S. Department of Commerce. [online] http://csrc.nist.gov/publications/nistpubs/800-30/sp800-30.pdf (accessed October 16, 2010). Theirm.org. (2002). A risk management standard. [online] http://www.theirm.org/publications/documents/risk_management_standard_030820.pdf (accessed October 18, 2010). Tho, I. (2005). Managing the risks of IT Outsourcing – Computer Weekly Professional Series. Amsterdam: Elsevier. Tse, E. (2009). Risk management on enterprise architecture and system integration. [online] http://www.projectperfect.com.au/downloads/Info/white-paper-enterprise-risk-management.pdf (accessed October 16, 2010). University of Portsmouth. (2010). MSc project management and leadership – Risk Management. Powerpoint lecture. Verhezen, P. (2010). Giving voice in a culture of silence: from a culture of compliance to a culture of integrity, Journal of Business Ethics, Vol. 96, pp.187-206. Read More