Advanced Forms of Risk Management and Proactive Planning
Essay by hazelfigueroa • August 5, 2015 • Business Plan • 3,872 Words (16 Pages) • 1,385 Views
Advanced Forms of Risk Management and Proactive Planning
Hazel Figueroa
University of Phoenix
Prof. Carlos Colon Riollano
Individual Assignment
July 23rd 2015
Project Risk Management Plan Paper
The RCMD ERP implementation project affects every area of the organization and is fundamental to its continued financial success. To promote the chances of project success, the project manager institutes a risk management plan. The project manager initiates the plan through a risk identification and analysis process. The project manager then records the risks, rating information, and status in a risk register to be updated throughout the project. The project team devises risk response plans and action plans to address the risks, and the project manager oversees risk monitoring and reporting. This plan ensures that the project team and project stakeholders maintain an awareness of the greatest threats to the project, and take appropriate measures to minimize the risks.
Risk Identification Procedures
For the RCMD company ERP implementation project, the project team used the following key elements/risk categories (Element K, 2010):
- Technical, quality and performance risks
- Project management risks
- Organizational risks
- External risks
The project manager used a similar approach for the technical, quality and performance risks. The project manager used a brainstorming session centered on the WBS with the IT team of managers to identify technical risks (Pedersen, 2013). Then the project manager used compared the list of risks generated by the IT managers with a checklist of common potential risks from DK Grant Software Solutions (Pedersen, 2013). Using the checklist after brainstorming with the IT team was a way of preventing the IT team from limiting their thinking during the brainstorming process (Cooper et.al, 2006).
The project manager ran focused brainstorming sessions to identify external risks and organizational risks (Pedersen, 2013). Then the project manager used a standard checklist of project management risks to identify risks in the area of project management.
Risk Analysis
Before project stakeholders can successfully perform risk analysis, the project manager must lead the stakeholders through both qualitative and quantitative risk rating processes. In the RCMD scenario, the project manager uses qualitative methods to do an initial identification of the most severe risks. The project manager follows this up with a more detailed semi-quantitative analysis, in which the group assigns rating values to each of the qualitative categories. After the risk rating process is complete, the project manager reviews the results with the key stakeholders to ensure that all are in agreement that the resulting risk factor ratings correctly indicate the most severe risks.
Qualitative and Quantitative Risk Rating and Analysis
The project manager designed likelihood and consequence rating scales specifically for this project to help the key stakeholders identify the level of risk severity and prioritize risks.
Likelihood Rating Scale
The likelihood rating scale lists qualitative categories of likelihood at the far left, and assigns a numerical value between.1 and .9 to indicate the likelihood of the risk occurring during the 18 month duration of the ERP project.
Likelihood Rating Scale for RCMD ERP Project | ||
Measure | Definition for Technical, Management, Organizational, and External Risks | |
Rare | 0.1 | Event has a less than 5% chance of occurring during 18 months of the project |
Unlikely | 0.3 | Event has a less than 20% chance of occurring during 18 months of the project |
Possible | 0.5 | Event has between 20 and 50% chance of occurring during 18 months of the project |
Likely | 0.7 | Event has a between than 50 and 70% chance of occurring during 18 months of the project |
Highly Likely | 0.8 | Event 70 - 90% likely to occur at some point during the 18 months of the project |
Almost Certain | 0.9 | Event has a better than 90% chance of occurring at some point during the 18 months of the project |
Consequence Rating Scale
Similar to the consequence rating scale, the likelihood rating scale assigns numerical values between .1 and .9 to qualitative descriptors of the impact of events in three categories: cost factors, schedule factors, and performance factors (Cooper et. al., 2005). Because risks can impact multiple areas it is important to identify a consequence rating for the areas that have the most potential to negatively affect the project. The RCMD ERP Project has a tight budget, and must be implemented at a cost 20 percent lower than similar projects in other organizations (University of Phoenix, 2015). Because of this, the cost constraint is of highest priority, and the category of severest impact to the project.
Consequence Scale for RCMD ERP Project | ||||
Measure | Cost Factor | Schedule Factor | Performance Factor | |
0.1 | Insignificant | Project does not exceed budget estimates, some transfer of funds occurs. | Minor schedule slippage compensated for by available schedule slack | Minimal impact to overall ERP performance |
0.3 | Low | Project costs exceed estimates by 1-3 percent. | Schedule slippage of less than one month. | Minor impact to ERP performance which can be compensated for by minimal manual business processes |
0.5 | Moderate | Project costs exceed estimates by 3-7 percent. | Schedule slippage of between 1-2 months. | Impact to some ERP requirements, but overall system still viable. |
0.7 | Very High | Project costs exceed estimates by 7-10 percent. | Schedule slippage of between 2-3 months. | Significant impact to ERP requirements or to RCMD current business processes |
0.9 | Catastrophic | Project costs exceed estimates by more than 10 percent. | Schedule slippage greater than 3 months. | Fundamental ERP requirements cannot be met |
Risk Factor Rating Table
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