To identify the risks, we need to go through a process of risk assessment.
For instance, what risks concern the daily operations of an Internet Service Provider?
If we consider all of the potential risks, we often generate quite a long list of areas to consider. Many of these risks will have little effect on the operation of the business, and can be tolerated. However, there will also be risks that will potentially threaten the continuance of the business or project.
So, we should consider the effects of each risk, and tackle the most dangerous threat first.
There are various methods and tools that can be used to investigate risks, such as Failure Prevention Analysis (FPA), otherwise known as Failure Mode and Effect Analysis (FMEA).
Having identified the key risks, we are in a position to be able to monitor them. To monitor a particular category we should assign benchmarks and regularly report results.
For instance, the ISP above considers failure of its server HDD a key risk. A key measurement is the number of hours uptime that the hardware has achieved. A benchmark is set based on the history of the server’s performance. Once the benchmark is approached, the HDD is replaced with a new unit.
For a software implementation, we might consider delivery of a particular piece of code a key factor affecting the project’s success or failure. In such a case, we would identify the key risks and place regular reviews of the risk at key stages on the project plan.
Additionally, to ensure that the review of each risk was carried out, we might choose to set a series of ‘gateways’. These are points in a project where the subsequent tasks cannot be carried out until all of the preceding tasks have been completed successfully.
In the context of most businesses we are faced with communicating our findings so that the various actions can be delegated. We can do this by using project plans, often in the form of Gantt Charts or Project Evaluation and Review Technique (PERT) Networks.
These are graphical representations of the risks identified together with the measures and reporting required to control them. This information can be gleaned from the FMEA work done previously.
Risks that occur repeatedly represent unnecessary waste and have contributed to many project failures. Whilst experience is gained during each project, it is impossible to remember every solution so it is necessary to document the risks and the control actions required.
This can be simply recorded in a small database, that records the initial risk and the subsequent reviews and actions that took place. Another method, which can be paper-based, is to generate a ‘risk register’.
Each risk is identified, and at every review its current status is recorded using ‘traffic light’ notation. ‘Green’ means that the risk is under control, ‘Amber’ means that there is currently some action required to bring the risk under control, with ‘Red’ indicating that the risk has occurred and remedial action is required immediately.
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Read the attached case study. |
4 mins |
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Discuss the case study and select three key factors that could affect the success of the project. |
3 mins |
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Wordstorm possible strategies for controlling the risks. |
3 mins |
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Draw up a risk management plan for the company. Consider the following: § what measures would you put in place, and why? § could any of the factors potentially cause the project to fail? § what tools would you employ to manage the risks? § what risks could you eliminate? |
5 mins |
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AudioWise manufactures and distributes commercial audio equipment, such as PA systems for stadiums, or sound systems for cinemas. The company was founded in 1975 and currently has a turnover of £4.3M per annum.
The Company has a computerised stock system, which includes basic financial reporting for management information and to assist the generation of year-end accounts. Sales order transactions and manufacturing operations are coordinated manually.
A significant proportion of the business (70%) is bespoke and often specified by the customer. Ten years ago AudioWise designed a range of standard modules that allowed many different configurations to be assembled from common components. However, around 20% of the business is still designed from scratch each time.
The Sales Director has proposed the introduction of an enterprise-wide information system, encompassing all of the existing computerised systems, plus the current manual functions. The implementation has a projected cost of £1.3M and a payback of 18 months after commissioning. It is anticipated that the project will take 9 months to fully commission.
To control costs, the Company is employing external consultants who have direct experience of this system, to oversee the management of the project. They will also be directly responsible for 20% of the installation. The balance of the installation will be performed by existing employees.
The project has the full backing of the Board.