Risks Associated With Project Development And Risk Management Plan

Types of Risks in Project Management

For every organization, it is important to conduct the process of risk assessment, so that the organization is prepared to deal with the various risks that may arise while executing a project. The projects are conducted in a manner, so that the benefits out of each opportunity and resources can be utilized in the project and also for dealing with the various uncertainties that may arise in the future. So, for handling and managing these uncertainties, there is a need for a proper risk assessment that should be conducted in an organization. The results of the assessment help in the formulation of a risk management plan that further helps an organization to identify a risk, categorize, and prioritize it and then finally avoid and mitigate these risks that will emerge in future. The risk assessment helps in identifying the qualitative and quantitative values of risk that are associated with a certain situation in an organization. The project management also plays a crucial role in the risk assessment and in the implementation of the processes, strategies, and plans that are the key elements of a project. But it is important to understand that the main focus of project management should be on four main factors that are time, scope, cost, and quality. Especially for new projects, it is important to conduct a risk assessment, so that the organization is able to manage such hurdles when they emerge and that should not affect the other key elements that are associated with a project. The risk management and the project management are a teamwork and it is a responsibility of the team to ensure that the project results are successful. For the organization, MMD Constructions it is important for them to identify the risks associated with the building of 700 houses and should generate ideas and plans to tackle them effectively. The main aim of the risk assessment is to be prepared in advance for all the problems.

Almost, all the projects are fraught with a wide range of risks that may emerge anytime. These risks may range from being the cost risk, resource risk or schedule risk. This is an important role and responsibility of a project manager to manage the risks associated with a project, so the uncertainties do not ruin the smooth functioning of the projects (Bergeson, 2014). Some of the basic risks that may emerge in most of the projects are-

• Cost & Resource Risks

Risk Management and Project Management – Working Together

The most common risks that are associated with any project is the cost and resource risks. The cost risks may emerge due to the escalation of the project cost that may arise due to inadequate and weak cost estimation practices by an organization. The cost risks affect the entire project massively and sometimes it is due to this risk that other risks are further generated. The cost risks may also give birth to the resource risk. When starting a project, then the resources acquired are based on the budget set up the organization. But with the development of the project, this demand for resources will fluctuate and also the supply of the resources fluctuate. The supply of the resources is affected by the market changing policies or the changes in the macro environmental factors (Borg, 2008).

• Schedule Risks

The main aim of the project manager is to focus on the time element associated with the project. But there are a number of barriers that may emerge and give birth to the schedule risk in an organization. The schedule risks lead to the delay in the project that may emanate due to external vendors, errors in the estimation process, natural factors and a delay in the process of execution.

• Scope Risks

The one thing that continuously changes with the development of a project is the scope of the project. These changes in scope can be handled as they are related to the development process. But the changes that have to be made due to the insistence of the customers, those risks creates a high level of complexities in a project that affects the scope, and thus the scope risk arises. These changes that will arise due to the changing demands of the customers have to be implicated as the main focus of each project is the customer (Cheng, Carrillo and Gibson, 2016).

• Planning Risks

The foundation of every project that is initiated in an organization is in the planning process. The planning process has to include all the certain and uncertain actions that have to be taken or may appear in various situations. The planning process also has to examine the probability of the uncertainty that may emanate at which stage of the process. Thus, if an organization does conduct a brainstorming planning then the chances of planning risk to occur are very high. The planning team of the project has to examine different scenarios associated with the project.

• Technological Risks

Risks Associated with Building 700 Houses by MMD Construction

The technological risk has become a massive part of risk management. In the present times, almost every organization uses technology for making the work easy and fast. The delay in the project may happen due to the technological risks like failing of a software program, a hardware breaks down, and a performance evaluator performs unsatisfactorily after a certain while and many others. The dependency of every organization on technology has resulted in the higher chances of technological risks with every project (Chol et al., 2012).

• Other Risks

Some of the other risks that may occur in a project are market risks, legal risks, natural risks, operational risks, strategic risks and governance risks. Though, almost all the risks can be predicted and reduced in a project, but an organization cannot predict the natural risk probability like the other risks and the chance of reducing it are very less.

The MMD Construction is initiating a project of building 700 local authority houses in Ireland, this task has to be completed in the time frame of 12 months, but there are a number of risks that the company might face during the execution and development process of the project (El-Sayegh, 2008). The reason why there is a high probability of risks because the process of construction in itself is a risky process. Thus, it is important for the risk management team to identify and analyze the various risks that may emanate in the project. Some of the most prominent risks that the organization MMD Construction might face are-

• Design Risks

The designs risks in the MMD project may arise due to the following reasons –

• The designs finalized for the houses did not include a very important aspect like the laws of construction, the new trends, the desires of the customer and many others.
• According to the set schedule, the design process has to be completed in one month but it the work is not completed within the set guidelines.
• After the finalization of the designs, the stakeholders might ask to execute certain modifications in the design, this will delay the project(Hartmann and Driessen, 2013).
• External Risks

The organization MMD Construction may also face some external risks due to-

• Every organization is in need for new stakeholders that may help in the growth of the project. But there are some demands and needs of the stakeholders too. The project’s new stakeholders may demand changes that will delay the schedule of the project.
• According to the Construction Federation of Ireland, the vexation objectors make a number of illogical public objections on a regular basis that affects the construction process of the houses. This affects the cost and schedule of the project. There is a high chance that the MMD Construction can face this risk. Though the construction is being conducted at the government property, still there are chances of such incidence(Hartmann and Juepner, 2017).
• Environmental Risks

There are some aspects that every construction project has to fulfill in order to ensure that the environmental risks do not occur. The risks may emerge due to-

• There is an environmental check that has to be conducted for every construction project. The environmental analysis has to be conducted, as the failure of this process may lead to legal actions against the organization and the shutting down of the project.
• There are certain new guidelines that are introduced by the Department of the Housing, Planning and Local Government of Ireland. The Building Standards often include certain changes that have to be followed by every construction company for the proper working of the project(Hartmann and Spit, 2015).
• Organizational Risks

The organizational risks can occur due to-

• The project of constructing 700 houses requires the hiring of a workforce for completing the project in the given schedule. But many a times, the hiring of unskilled and inexperienced labor affects the project.
• The process of construction is risky. Accidents take place frequently on the construction sites. The managing of these accidents and the legal works, leads to loss of time and cost (Irving, Prager and Standley, 2010).
• Risks related to Project Management

The risks that may happen due to project management are-

• It is the duty of the project manager to ensure that all the processes and activities conducted on the construction project should be with the budget. This is important to ensure that the MMD Construction strictly monitors the financial resources that are being incurred on the project. As in the construction process, the cost of building mostly overruns and this affects the project.
• The MMD Construction will have a core team and along with its many sub-teams. The problem which may arise in the management process is multiple and strong opinions of different people. This leads to conflicts between team members that is a huge risk for the project(Muriana and Vizzini, 2017).

The process of risk management is a continuous process and is conducted regularly until the project completes. The risk management includes certain processes that help in curbing the problems that emerge in a project. The various phases of risk management are planning, identification, analysis, monitoring, and control. These processes are strictly monitored and are updated whenever required during the entire lifecycle of the project. The process of risk management is continuous as this helps in the identification of new risks that may emanate in the project (Nieto-Morote and Ruz-Vila, 2011). The risk management plan is executed with the main objective of reducing the influence of the adverse situations on the project.

Phases of Risk Management Plan

The risk management plan commences with the identification of risks. This process is important as the identification of risk will help in formulating strategies to deal with them. Not addressing a risk leads to putting the entire project into jeopardy. It’s also important to categorize these into various parts like project risks, budget risks, time risks, quality risks, people risks and many more. These categories can be further classified into subcategories to create a more detailed arrangement of the risk for handling appropriately (Park, 2017).

After the process of identification, it is important to analyze and evaluate the risks. The analysis of the risk will be conducted on the basis of the impact of the risk on the success of the project and the completion process. The risks are mostly analyzed on the basis of two factors that are, likelihood and the level of impact. The risk has to be analyzed and evaluated and the main responsibility of conducting this task is on the project manager (Roberts, 2009).

The process of categorizing the risks will be very helpful in identifying the various risks triggers associated with the risks. This will help in the allocation of risks according to the skills of the workforce. The selected teams will examine each risk deeply to identify the various triggers that are associated with a risk.

The risk management plan has to be created to control the risks that may occur in the lifecycle of the project (Van Wyk, Bowen and Akintoye, 2008). The main aim of this plan is to mitigate the potential risks that might emanate in a project. There are two approaches to risk mitigation, they are-

• Preventative- This is conducted to reduce the occurrence of the risk on the project in advance and it executed before the risk has been realized.
• Contingency- This approach is conducted after the risk has been realized.
• Monitoring & Reviewing

The project will continue, according to the set schedule and along with it, the risk management plan will also continuously work. Now, it is the duty of the project manager to monitor the project process and the risk management plan like a hawk and make necessary changes whenever required (Verta and Triipponen, 2011).

The organization MMD Construction has formulated a risk management plan, implement it and then regular monitoring is also required. The project of building 700 houses is a complex project and thus, this plan will be helpful in addressing the emerging issues of the project.

The main risks that have been identified in the MMD Construction project are design risks, external risks, environmental risks, organizational risks, and risks in the project management. These risks can be further categorized in subcategories like the organizational risk can be categorized into time and cost risks. These risks can also be categorized according to the department they belong to like finance team, human resource team, and many others. The organization MMD Construction have to maintain risk logs that keep a record of the various risks and the impact of that risk on the time and cost factor. The risk logs also keep a record of the residual risks (Davidson Frame, 2014).

Conclusion

The main risk that has been identified in the identification process is the time and cost risk. The time risk has to be evaluated to find the root cause of the risk. This has to be conducted with the schedule risk also. The analysis has to find the impact of these risks on the project and the probability of the risk in the project. The time and schedule risk have the highest probability of occurring in this project as most of the risks identified leads to impact the project by these means (Ljungblom and Lennerfors, 2018).

In the construction field, there are a number of factors that can trigger a risk, these triggers are mostly the uncertain changes that may occur in the organization, law, government and the market. The key cause of the cost risk is the overrunning of the project budget, this overrunning will happen due to not proper allocation and utilization of resources. So the main trigger is the wastage of resources. The identification of risk triggers thus mean to identify the root cause of the issues in the project (McKenna and Baume, 2015).

• Risk Management Plan for the MMD Construction
• The risk can be managed in the following four ways, that is-
• Avoid- Ignoring and avoiding the risk leads to bigger risk rates and this option should be opted by the construction company only if they do not have a risk management plan.
• Mitigate- The process of mitigating means that the construction company is formulating a plan to reduce the probability of the risk in the project(Mengel, 2008).
• Transfer- This option is going to have a massive impact on the organization as this is going to cost the organization a huge amount of money. This cost of loss, though will be less than the cost if the organization would have accepted the risk.
• Accept- Many a time, the organization accepts the risks, to further determine the impact of the risk on the project. This managing style has the biggest impact on the organization(Mir and Pinnington, 2014).
• The organization MMD Construction will manage the risks through the mitigation process and for this, it is important for the organization to implement the following changes-
• The project has to be completed in 12 months, so the organization has to focus on the time factor associated with the project. The risk logs have to be regularly viewed and this if there is any delay that has been identified then that department has to instantly deal with it(Turner, 2010).
• The project of constructing 700 houses is a huge project and there are high chances that the budget will overflow. The organization has to conduct cost cutting on the various aspects where it is possible. Also, the cost allocation on various processes, practices, and strategy have to be very economical. As there are many unexpected expenses that may arise and for this, it is important to control the cost from the initial stage(Ponnappa, 2014).
• The project can be delayed due to any public obligations, the organization has to handle this risk with calmness and also have to ensure that while the risk is being curbed the project work does not slow down.
• The project manager has to ensure that all the technical instruments that are being utilized in the project are updated and in case any of the technical tools breaks down, then a spare one should be available or the organization should have an alternative to it(Taresh Ejel, 2018).
• Monitoring & Reviewing

The project manager, though should not be held responsible for the failure of the project, but he has the responsibility to ensure that the risk management plan should be continuously working and this working has to be monitored by the project manager at regular intervals. The project manager of the construction company has to ensure that the risks related to cost, schedule, scope, and stakeholders should be regularly monitored and that their probability of occurring in the project should reduce after the implementation process. If the same risks keep emanating even after the implementation of the plan, then there are some changes that the project manager has to make. The changes should be made after brainstorming the root cause of the issues again, to identify new risk triggers (Zwikael, 2016).

Conclusion

The main aim of the MMD Construction is to complete the process in the 12 month time. This is going to be a difficult task for the company, but the risk management plan can be very helpful in achieving this tough goal. The MMD Construction have to try to avoid some of the various risks that are associated with the law, institutions and the environment. There are other important aspects too, so the organization should focus more on those aspects. The risks related to time and cost are the main risks that the project will face and thus to manage them in advance the process of mitigation is the best available option.

References

Bergeson, L. (2014). EPA’s New, Final Work Plan Risk Assessments and What They Mean to You. Environmental Quality Management, 24(2), pp.89-96.

Borg, D. (2008). ‘Make a new plan, stan’. Journal of Healthcare Risk Management, 28(4), pp.2-3.

Cheng, L., Carrillo, E. and Gibson, M. (2016). Applying the Project Management Principles for Risk Management Plan in Chemical Industry. International Journal of Strategic Management, 16(2), pp.71-76.

Chol, C., Guy, C., Jacquet, A., Castot-Villepelet, A., Kreft-Jais, C., Cambazard, F., Beyens, M., Mounier, G., Marsille, F. and Mismetti, P. (2012). Complications of BCG vaccine SSI® recent story and risk management plan: the French experience. Pharmacoepidemiology and Drug Safety, 22(4), pp.359-364.

Davidson Frame, J. (2014). Reconstructing Project Management. Project Management Journal, 45(1), pp.e2-e2.

El-Sayegh, S. (2008). Risk assessment and allocation in the UAE construction industry. International Journal of Project Management, 26(4), pp.431-438.

Hartmann, T. and Driessen, P. (2013). The flood risk management plan: towards spatial water governance. Journal of Flood Risk Management, 10(2), pp.145-154.

Hartmann, T. and Juepner, R. (2017). The flood risk management plan between spatial planning and water engineering. Journal of Flood Risk Management, 10(2), pp.143-144.

Hartmann, T. and Spit, T. (2015). Implementing the European flood risk management plan. Journal of Environmental Planning and Management, 59(2), pp.360-377.

Irving, A., Prager, A. and Standley, C. (2010). A customizable plan for effective claims management. Journal of Healthcare Risk Management, 30(2), pp.11-19.

Ljungblom, M. and Lennerfors, T. (2018). Virtues and Vices in Project Management Ethics. Project Management Journal, 49(3), pp.5-16.

McKenna, A. and Baume, G. (2015). Complex project conceptualization and the linguistic turn; the case of a small Australian construction company. International Journal of Project Management, 33(7), pp.1476-1483.

Mengel, T. (2008). Outcome-based project management education for emerging leaders – A case study of teaching and learning project management. International Journal of Project Management, 26(3), pp.275-285.

Mir, F. and Pinnington, A. (2014). Exploring the value of project management: Linking Project Management Performance and Project Success. International Journal of Project Management, 32(2), pp.202-217.

Muriana, C. and Vizzini, G. (2017). Project risk management: A deterministic quantitative technique for assessment and mitigation. International Journal of Project Management, 35(3), pp.320-340.

Nieto-Morote, A. and Ruz-Vila, F. (2011). A fuzzy approach to construction project risk assessment. International Journal of Project Management, 29(2), pp.220-231.

Park, Y. (2017). The Influence of Plan Demographics on Contribution Behavior of 401(k) Participants. Risk Management and Insurance Review, 20(1), pp.7-35.

Ponnappa, G. (2014). Project Stakeholder Management. Project Management Journal, 45(2), pp.e3-e3.

Roberts, C. (2009). Board meets to review, plan activities. Perspectives in Healthcare Risk Management, 4(4), pp.2-3.

Taresh Ejel, A. (2018). Impact of Integration Management on Construction Project Management Performance (Oil Refining Company). International Journal of Engineering & Technology, 7(3.5), p.40.

Turner, J. (2010). Evolution of project management research as evidenced by papers published in the International Journal of Project Management. International Journal of Project Management, 28(1), pp.1-6.

Van Wyk, R., Bowen, P. and Akintoye, A. (2008). Project risk management practice: The case of a South African utility company. International Journal of Project Management, 26(2), pp.149-163.

Verta, O. and Triipponen, J. (2011). The Kokemaenjoki River Basin Flood Risk Management Plan–A National Pilot from Finland in Accordance With the EU Floods Directive. Irrigation and Drainage, 60(3), pp.84-90.

Zwikael, O. (2016). International journal of project management special issue on “project benefit management”. International Journal of Project Management, 34(4), pp.734-735.