Risk Management - Research Paper Example

Table of Contents Table of Contents 1 4.0 Objectives and scope of the project risk and issues management process 2 4.1 Objectives of PRIM process 2 4.2 Fish Tank Sea Food Restaurant project PRIM scope 2 5.0 Roles and responsibilities of project participants in PRIM process 3 6.0 Project Risk Management Plan 5 6.1 Project risk identification 6 6.2 Project risk analysis 13 6.3 Project risk management strategies 19 6.3.2 Resource estimation and budgeting 23 7.0 Project opportunity management 23 Risk management is not only about recognizing and managing risks but also learning how to best recognize and capitalize on opportunities to ensure both project and future success. Opportunity Management is about removing barriers to success and creating a path for yourself and your teams. 23 7.1 Opportunity register 23 8. Project issues management process 25 Issues management process in Fish Tanks project can be divide into four phases as shown in the figure **** below. 25 8.1 issues identification 25 8.2 issues analysis 26 8.3 Respond to issues 26 8.4 issues tracking and reporting 26 9.0 Conclusion 26 Bibliography 28 4.0 Objectives and scope of the project risk and issues management process 4.1 Objectives of PRIM process The objectives of PRIM process in the establishment of Fish Tank Sea Food Restaurant project is To identify/recognize risks and prioritize potential risk events at all levels at an early stage, To analyze and evaluate identified risks using established risk management methods, tools and techniques to assist in the analysis and reporting of identified risk events, To ensure availability of adequate resources for management of critical risks and issues 4.2 Fish Tank Sea Food Restaurant project PRIM scope The scope of the PRIM process on this project is bounded by the main project’s objectives to establish a new restaurant dealing with the sale of sea food cuisine design to accommodate people of all walks. The PRIM process will cover all the risks and issues that might that might affect the successful completion of the project. Issues such as budgetary deficit, implementation time, project team coordination and communication and the fact that this investment is established with lots of uncertainty among other factors critical successful implementation of the project. 5.0 Roles and responsibilities of project participants in PRIM process To effectively coordinate the PRIM process responsibilities have been spread to various parties and to achieve smooth running of the process communication and the hierarchy of communication has been established. Table ***: Participants in PRIM process Roles in Project Parties Roles in PRIM Report to Whom Project owners Directors of fish tanks Actively involved in risks and issue identification Are members of risk review committee They approve funds for PRIM activities Project manager/risk manager Mr John Chairs the PRIM meetings Communicate and consult other participants for risk and issue information Ensure risks are effectively identified, documented and reviewed regularly with the risk owner. Ensure risks management activities are operating effectively Involved in the development of contingency plan in liaison with the risk owner and risk specialist Regularly communicate the identified risk to the project owners for approval and solicit funding. Guide the project team through the PRIM process Project owner Project team members Procurement team, building team, interior designers, Report any project risks or issues to the risk owners Help in the implementation of contingency plans to avert risks and issues Participate in the meeting of the risk review committee Risk owner, group leader Risk owners Team leaders They are responsible for managing, control and implementation of all aspects of risk at their area. Actively involved in risk identification process. Risk manager Action owners Appointed by the risk owner Implement the contingency plans and evaluate its effectiveness Identify the secondary risks Report the action progress to the risk owner and make suggestion for improvements Risk owner Issue owners Appointed by the risk manager Are in charge of designing an action plan and monitoring its implementation for the identified issues within their area of jurisdiction. Report to the risk review committee. Risk manager Risk review group Comprise of risk manager, risk owners, issue owner and the project owner. In-charge of evaluating the impact of the risk. Design mitigation and contingency plans Project owners Risk sponsor Is an executive member of the project owners Approves the risk mitigation actions Project owners 6.0 Project Risk Management Plan The objective of the risk management plan in the Fish Tank Sea Food Restaurant project is to find the potential risks that may have adverse impacts on the success of the project and develop the suitable response strategies to minimize the influence beforehand to enhance the project success. Moreover, with the guidance of the plan, the project team can be well prepared at the time the risks appear thus reduce the probability of making unwisely decisions resulting from the time pressure (Federal-Highway-Administration, 2012). Risk management in a small business should not be a separate plan. There are relationships between risk management and many of the management processes and techniques that may be employed to ensure the successful operation of a business. Good practice is to ensure that all of the following business areas are considered when developing the risk management plan: Business Planning occupational health and safety human resources management compliance financial management client management contract management quality assurance 6.1 Project risk identification The main aims of project risk identification are twofold: identify and classify risks that could have adverse effects on the project and keep a detailed record of these risks (Dcosta, 2012). The final deliverables of this process is a list of risks that may affect successful implementation of the project which are assigned to a team member and tracked throughout the project development and delivery process (Tennant, n.d.). This process is an ongoing process and emerging risks are continually added to the risk register. The following tools and techniques may aid in the process of risk identification. Documentation reviews The project participants i.e project manager, team leaders and team members carry out a review of all documents of the current project (Fish Tank Project) and a research on the documented risks and outcome of previous similar projects. Brainstorming The project manager together with the representatives of the project teams confined a meeting and freely discussed risk management issues. The agenda of the brainstorming meeting was as outlined in appendix ****** Interviewing Interview session was organized with all the project stakeholders of the Fish Tank project. The extracts of the interview questions are attached in appendix ****** SWOT Analysis SWOT analysis is based on studying the Strengths, Weaknesses, Opportunities and Threats of all aspects of the project (eHealthProgrammeOffice, 2008).  Studies are conducted via the project documents, stakeholder analysis and inputs from all members of the project. The results of the SWOT analysis are outlined in appendix ***** Check lists A check list of the identified risks during the study of past similar projects or from industry specific standards was prepared by the project manager to help in to head start the risk identification process. The prepared check list is shown below in table ***** Risks Classification Risk Breakdown Structure (RBS)-A three level structure developed by the project team which categorize the risk factors based on their characteristics. According to the Fish Tank RBS, there are 13 risk packages under 4 main categories which are external, internal, technical and environmental. Table ****: RBS Categories has detail description of the four categories. All the risks identified in the search step are classified and assigned into a risk package with an identification number, refer Figure ******: Fisk Tank RBS. Figure ******: Fish Tank RBS Structure and documents The document risks in the Table ****: risk register: identification is assigned to the risk owners based on the nature and areas of the risk. The risk owners are selected based on their area of specialization which places them on a better position to draft effective risk aversion and mitigation strategies. At this phase the risks were identified, a full description of the risk given and the risk owners for the risk identified in table ******: Risk register-Identification and further risk triggers identified for the stated risks in table ******. Table ******: Risk Register for Fish Tank-Sea food Restaurant as at 1/11/2012: Identification ID Risk Title Risk Description Date Raised Risk Owner R1 Inadequate Capital  The initial capital might be inadequate to complete the project since one of the funders pulled off. 12/10/12 Project manager R2 Strong Competitors The existing and upcoming restaurants offering similar service pose a great danger to the growth of the business 10/10/12 Project manager R2.2 Low market demand At initial phases customers might not be aware of the new and various sea food cuisines. 29/10/12 Specialist in-charge of publicity R2.3 Supply shortage Due to underestimated quantity of materials shortage of materials and food staff might occur. 28/10/12 Project manager R3.1 Lightening The Town have been experiencing rampant cases of lightening 1/10/12 Construction manager R3.2 Storm The storm had been predicted to occur in two weeks’ time and this might delay the work 24/10/12 Project manager R3.3 Fire and electric fault Electric fault can cause fire and electric fault might cause stored food stuff to go bad 13/10/12 Electrical and procurement manager R4.1 Staff shortage The few available staff might not effectively serve the customers 29/10/12 HR manager R4.2 Sick staff Sick workers do not easily access immediate medical attention 30/10/12 Project manager R5 Demanding Workload The staff cannot finish work on time due to demanding workload 25/10/12 Project manager R6  Location The selected location has some dispute that might end up in court thus delay the project implementation 16/10/12 Legal advisor R7 Social and Political Risk Change in legislation and policies 14/10/12 Legal advisor R8.1 Lack of support from other departments Other departments reluctant to cooperate or provide adequate resources to the project 20/10/12 Project Manager R8.2 Communication lag between project team Lag in communication between team members since some members are overseas 10/10/12 Project Manager 6.2 Project risk analysis Risk analysis assists the project team to identify and manage potentials risks that could drawback the venture initiatives. The risks comprise of two things: the probability of an adverse event happening and the harmful effects that follows the occurrence of the event. Risk analysis is always done after risks have been identified to determine the likelihood of the threats occurring. In the Fish Tank Sea Food Restaurant project the major project constraints include the completion time, scope, project cost, and quality of the project deliverables and outcome. To rank these constrains a five scale linkart scale was used to rank the impacts. On this project the stakeholders were keen on the quality of the outcome and time extension was not much of a problem provided it did not increase the project cost. Therefore cost and quality had strangent considerations. This can be captured in the table ***** below Table ******: Scale Definition for Impact IMPACT SCORE DESCRIPTOR TECHNICAL OBJECTIVES BUSINESS OBJECTIVE COST EFFECT ON CLIENT SCHEDULE Strategic/ political/Reputational 1 Green Negligible Minimum impact- no disruption Minimum impact- no disruption Minimum financial loss21 days variance to key milestone date closure Damaging publicity Adapted from (Baccarini & Archer, 1999) Probability This is the weighted likelihood of a particular risk occurring, including a consideration of the frequency with which this may arise. Table ******: Scale Definition for Probability Value Description Frequency of occurrence 1 VLO Hard to for the event to occur 2 LO Not likely to happen 3 MED As likely to occur as not 4 HI There is likelihood of the risk occurring 5 VHI Almost certain the risk will occur and frequently occurs Adapted from (Dcosta, 2012) The identified risks are further ranked based on the two tables above; table ***: impact definition and Table ***: probability definition. The final rankings obtained after evaluation is logged in the risk register: analysis in the appendix ***. For example the predicted storm is almost 100% it will occurs which is VHI probability of occurrence and its occurrence will increase the project completion by over 20%. Thus both considered factors are VHI based on the scale. These can be best represented in a risk impact/probability chart which clearly shows the risk that calls for immediate interventions. Three zones were identified for this project based on the priority of intervention required. These zones were marked low priority, medium priority, and high priority. Figure 1: P/I Matrix Probability VLO LO MED HI VHI Score 1 2 3 4 5 Impact Catastrophic 5 5 10 15 R1 20 25 Major 4 4 R3.1 R3.3 R4.1 R5 8 R8.2 12 16 R3.2 20 R2.3 Moderate 3 3 R7 6 R2, R2.2 R8.1 9 12 R4.2 R6 15 Minor 2 2 4 6 8 10 Negligible 1 1 2 3 4 5 ACCORDING TO THE probability impact matrix three high priority risks, three Medium priority risks and eight low priority risks can be identified. Detailed table results is shown in appendix *****: Risk register with its impact and probability occurrence. 6.2.1 Expected Monetary Value Analysis (EMV) The results of the above qualitative risk analysis were the lists of risks with a priority and level of urgency assigned (Baccarini & Archer, 1999). By utilizing Expected Monetary Value (EMV), these risks can be quantified to examine the correctness of the qualitative techniques. EMV is obtained by multiplying the probability of occurrence with the assigned monetary values in the event the risk occurs (Sharma, 2010). This value can either be a positive value for positive risks and negative for the negative project threats. Positive risks for instance there is 20% probability of the government reducing tax of licensing for restaurants at if this happens the expected impact on the project cost will be $2000. Therefore EMV =0.2*$2000 =$400. The table below summarizes the EMV for the high priority risks Table*****: EMV for critical risks NO High Priority Risks Probability Impact (NT) EMV (NT) R1 Inadequate Capital 60% May halt the project and cost the project extra $10000 $6000 R2.3 Supply shortage 80% May cost the project additional $20000 (50%) $16000 R3.2 Storm 80% May cost an extra $25000 $20000 R4.2 Sick staff 60% Cost the project extra $25000 $15000 R6 Location 40% Legal fee and other dispute issues may cost the project $300000 $120000 R8.2 Communication lag between project team 20% Compromise service delivery thus cost the project extra $15000 $3000 Total EMV $172000 6.3 Project risk management strategies This process involves with the development of alternatives and actions to enhance opportunities and reduce threats. The Fish Tank project team recognizes the fact that risk management strategies framework should be put in place as it provide a well-structured and coherent approaches for identifying, assessing and managing risks (www.rdec.gov.tw, 2004). A well laid down strategies may last till the project completion with regular update and review to accommodate new emerging threats (eHealthProgrammeOffice, 2008). 6.3.1 Management Strategies in coming up with the management strategies the project team considered the following questions Can the project live with the risk? Is there an effective and cost saving ways to mitigate or avoid the risk? If yes how can we measure the effectiveness of the risk measure? Will it be effective to design strategies as the risks event occur? The project team explored the best alternatives that balance between cost of the action and the impact. A response strategy can be chosen based on the following: a) Avoid: eliminate the root cause of the risk by instituting changes in the project strategy b) Mitigate: take action to reduce the impact of the expect risks or the chances of its occurrence c) Accept with contingency plan: accept the risk and design contingency plans to be executed in the event of the risk occurrence. d) Accept without contingency plan: ignore the risk until it occurs for the action plans to be designed e) Transfer: divert the risk to another party f) Monitor: if the is no cost effective options to be take the risk can be monitor to determine if other action plan could be applied. The table below show the medium and high priority risks and there management strategies to either mitigate, avoid, divert the risk impact. Table *****: medium and priority risk register risk response NO High Priority Risks Probability Impact (NT) Risk Response R1 Inadequate Capital 60% May halt the project and cost the project extra $10000 Formulation of a budget that is realistic and takes into account miscellaneous and unforeseen expenses  Source for adequate funds  R2.3 Supply shortage 80% May cost the project additional $20000 (50%) Avoid: order extra material to last for months Mitigation: install refrigeration systems R3.2 Storm 80% May cost an extra $25000 Install refrigerator to store enough sea food to last till the end of the storm. R4.2 Sick staff 60% Cost the project extra $25000 Establish a medical care unit within the project site. R6 Location 40% Legal fee and other dispute issues may cost the project $300000 Adhere strictly to regulation and ensure that all legalities are followed as regards to labour.  As long as the budget is adequate to the task then the expenses associated with the ideal location can be managed Finding premises that are affordable but in an advantageous location R8.2 Communication 20% Compromise service delivery thus cost the project extra $15000 Establish an open communication between the team members Establish a structured communication channels 6.3.2 Resource estimation and budgeting 7.0 Project opportunity management Risk management is not only about recognizing and managing risks but also learning how to best recognize and capitalize on opportunities to ensure both project and future success. Opportunity Management is about removing barriers to success and creating a path for yourself and your teams. 7.1 Opportunity register The opportunity register will be regular be updated Table ******: Opportunity Register Data Field Your Input Business Concept: Short description Seafood restaurant in Dubai. Possible upside: What might the concept generate in revenue or profit terms? There is an extremely high demand for fish due to the culture and traditions and awareness of health There is ready availability of fresh fish from the waters surrounding the gulf which are not yet over fished. Related Trends The improvement of the economy is causing diversification in palate tastes leading to greater demand for different types of fish. This means that with proper management and an excellent standard of cuisine, the restaurant stands to benefit from the widespread popularity of seafood, both with the locals and with tourists and other visitors from further away. Relevant Data: The emerging popularity of seafood so far is so high that demand outstrips supply. This is a tremendous opportunity for the restaurant as it implies that a ready demand for the product is already in place. This means however that a reliable source of raw material must be identified and cultivated. Fish farms are a good source of raw material but not all fish can be grown domestically. This means that a sustainable source of wild-caught fish must also be sought. A reputation for reliability in sourcing of all kinds of fish products coupled with excellent cooking is a tremendous opportunity for the restaurant. Obstacles and Barriers: There is not enough sustainable sources of fish to feed the demand. Position: The sea food restaurant project holds immense importance in my life as from a very young age I developed a taste for different kind of sea food and was interested in opening a business related to it. For the same purpose, I use to explore for different restaurants in UAE to find variety of sea foods that can satisfy my taste buds and with the passage of time I realized that none of the restaurants had variety when it comes to sea food cuisines. Therefore, I thought of opening a sea food restaurant that will offer customer multiple cuisines to select from. I strongly believe that sea food business has immense potential due to incredible demand of local and tourist population of dining at sea food restaurant and eating fish. Competition: Competition includes the many seafood restaurants already operating in Dubai. Sources: Other Restaurant Managers Food & Beverage Managers Chefs Walk in clients Research Analyst Technical Analyst Newspaper Websites Face Book Timing: The window of opportunity to get in on the ground floor is rapidly disappearing and therefore advantage must be taken of the opportunity immediately. 8. Project issues management process Issues management process in Fish Tanks project can be divide into four phases as shown in the figure **** below. Adapted from (www.rdec.gov.tw, 2004) 8.1 issues identification Issues can only be managed once they have been identified and a good identification strategies is essential for a project (Management, 2008). In Fish Tank project the project manager encourages the team member to be proactive in issues identification and reporting The team members were inducted on the issues identification. 8.2 issues analysis This phase is concerned with assessing each issue for its adverse impact, probability of its occurrence and estimating the monetary value implication in case of its occurrence. For example the issues impact can be categorized as either very low, low, medium, high or very high. 8.3 Respond to issues The project manager together with the team members will decide on the proper activities for reacting to emerging project issues. The determined issues management activities would be assigned to the risk owner to take the appropriate action and monitor to evaluate the effectiveness of the action taken and determine if the issues has been eliminated completely 8.4 issues tracking and reporting This phase apply to all the phase and is an iterative process. The project manager is charged with the responsibility of tracking issues by maintaining and updating the issues log in appendix ***** (www.qnpm.gov.qa, 2007). He also monitors to ensure issues are completely attended to and issues management activities are effective. The project manager reports the status of the issues weekly to the stakeholders, the steering committee and the project team leaders. 9.0 Conclusion Bibliography Baccarini, D. & Archer, R., 1999. The risk ranking of projects: a methodology. [Online] Available at: HYPERLINK "ftp://150.164.18.2/pub/lupercio/management/sem_0711.pdf" ftp://150.164.18.2/pub/lupercio/management/sem_0711.pdf [Accessed 13 November 2012]. cdc, 2006. CDC unified process practice guide:Risk management. [Online] (11/30/06) Available at: HYPERLINK "http://www2.cdc.gov/cdcup/library/practices_guides/CDC_UP_Risk_Management_Practices_Guide.pdf" http://www2.cdc.gov/cdcup/library/practices_guides/CDC_UP_Risk_Management_Practices_Guide.pdf [Accessed 8 November 2012]. Dcosta, A., 2012. How to identify risks in a project. [Online] Available at: HYPERLINK "http://management.helium.com/how-to/10446-how-to-identify-risks-in-a-project" http://management.helium.com/how-to/10446-how-to-identify-risks-in-a-project [Accessed November 2012]. eHealthProgrammeOffice, 2008. Risk and Issue Management Operating Procedure. [Online] (1.0) Available at: HYPERLINK "http://www.ehealth.scot.nhs.uk/wp-content/documents/ehealth-risk-issue-management-position-paper.pdf" http://www.ehealth.scot.nhs.uk/wp-content/documents/ehealth-risk-issue-management-position-paper.pdf [Accessed 8th November 2012]. Federal-Highway-Administration, 2012. 2. Risk Identification. [Online] Available at: HYPERLINK "http://international.fhwa.dot.gov/riskassess/risk_hcm06_02.cfm" http://international.fhwa.dot.gov/riskassess/risk_hcm06_02.cfm [Accessed November 2012]. KELLIHER, P.O.J., WILMOT, D. & P.J.M.KLUMPES, 2011. A COMMON RISK CLASSIFICATION SYSTEM FOR THE ACTUARIAL PROFESSION. [Online] (3.3) Available at: HYPERLINK "http://www.actuaries.org.uk/system/files/documents/pdf/discussion-paper-v33-final.pdf" http://www.actuaries.org.uk/system/files/documents/pdf/discussion-paper-v33-final.pdf [Accessed 10 November 2012]. Management, Q.n.p., 2008. Issue Management plan. [Online] Available at: HYPERLINK "http://www.qnpm.gov.qa/english/resources/5%20Issue%20Management/Issue%20Management%20Preparation%20Guidelines.PDF" http://www.qnpm.gov.qa/english/resources/5%20Issue%20Management/Issue%20Management%20Preparation%20Guidelines.PDF [Accessed 16 November 2012]. Sharma, R., 2010. Calculating Expected Monetary Value (EMV). [Online] Available at: HYPERLINK "http://www.brighthubpm.com/risk-management/48245-calculating-expected-monetary-value-emv/" http://www.brighthubpm.com/risk-management/48245-calculating-expected-monetary-value-emv/ [Accessed 13 Nov 2012]. Tennant, D.V., n.d. Project Management: Risks. [Online] Available at: HYPERLINK "http://files.asme.org/Divisions/Management/15920.pdf" http://files.asme.org/Divisions/Management/15920.pdf [Accessed 8 November 2012]. www.headfirstlabs.com, 2012. Project risk management: Plannng for the unknown. [Online] Available at: HYPERLINK "http://www.headfirstlabs.com/books/hfpmp/hfpmp_ch11.pdf" http://www.headfirstlabs.com/books/hfpmp/hfpmp_ch11.pdf [Accessed 13 November 2012]. www.qnpm.gov.qa, 2007. Issues log templete. [Online] Available at: HYPERLINK "http://www.qnpm.gov.qa./english/resources/1.html" \l "issue" http://www.qnpm.gov.qa./english/resources/1.html#issue [Accessed 16 November 2012]. www.rdec.gov.tw, 2004. Risk management Strategy. [Online] (1.0) Available at: HYPERLINK "http://www.rdec.gov.tw/DO/DownloadControllerNDO.asp?CuAttachID=17501" http://www.rdec.gov.tw/DO/DownloadControllerNDO.asp?CuAttachID=17501 [Accessed 15 November 2012]. appendices Appendix *****: Risk register with its impact and probability occurrence ID Risk Title Risk Description Probability Impact Date Raised Risk Owner R1 Inadequate Capital  The initial capital might be inadequate to complete the project since one of the funders pulled off. 3 5 12/10/12 Project manager R2 Strong Competitors The existing and upcoming restaurants offering similar service pose a great danger to the growth of the business 2 3 10/10/12 Project manager R2.2 Low market demand At initial phases customers might not be aware of the new and various sea food cuisines. 3 2 29/10/12 Specialist in-charge of publicity R2.3 Supply shortage Due to underestimated quantity of materials shortage of materials and food staff might occur. 4 4 28/10/12 Project manager R3.1 Lightening The Town have been experiencing rampant cases of lightening 2 2 1/10/12 Construction manager R3.2 Storm The storm had been predicted to occur in two weeks’ time and this might delay the work 4 4 24/10/12 Project manager R3.3 Fire and electric fault Electric fault can cause fire and electric fault might cause stored food stuff to go bad 2 2 13/10/12 Electrical and procurement manager R4.1 Staff shortage The few available staff might not effectively serve the customers 2 2 29/10/12 HR manager R4.2 Sick staff Sick workers do not easily access immediate medical attention 3 4 30/10/12 Project manager R5 Demanding Workload The staff cannot finish work on time due to demanding workload 2 2 25/10/12 Project manager R6  Location The selected location has some dispute that might end up in court thus delay the project implementation 2 4 16/10/12 Legal advisor R7 Social and Political Risk Change in legislation and policies 1 3 14/10/12 Legal advisor R8.1 Lack of support from other departments Other departments reluctant to cooperate or provide adequate resources to the project 2 3 20/10/12 Project Manager R8.2 Communication lag between project team Lag in communication between team members since some members are overseas 2 4 10/10/12 Project Manager Appendix *****: Issue Log 1. BASIC ISSUE INFORMATION 2. ISSUE ASSESSMENT INFORMATION 3. ISSUE RESPONSE INFORMATION Issue Number Issue Description Responsible Date Reported day-month-year Last Update day-month-year Impact H / M / L Impact Description Status Resolved / Not Resolved Completed Actions Planned Future Actions Read More