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Critical Analysis: Effective and Efficient Risk Management

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Critical Analysis: Risk Management

Effective and Efficient Risk Management

Accordingly, a project can simply be considered with simple factors that include the start date, end date, the tasks and responsibilities to be conducted and when all of these would be finished with some idea of the resources such as finance, people and machineries and facilities or even software that will be needed during the project course. A project can be defined as interconnected activities that involve conversion of data or material resources over limited timeframe. The need to pay more attention on aspects of improving the performance and use of these resources has increased the demand for and the utilization of the project-based strategies. According to Williams (2002), projects should change an unsatisfactory (current or future) state or condition to a better state within a specific period of time, through the use of limited effort.

In a more practical and sensible terminologies, a project can be defined as a manner that needs a new tangible output (the creation) and needs enough resources and knowledge to carried out the realization of the context within that certain constraints of finances, time and specifications (Cooper, Raymond and Walker, 2004). In addition, project needs expertise either in-house or outsources, and need to be pooled together to establish the changes-the transition from the idea to the implementation in accordance with the expectation of the stakeholders that are given by professionals, consultants, contractors and even the sub-contractors of the project. Project management put the individuals involved into a very complex position due to the weight of the obligations associated with the tasks.

Based on existing literature, the rate of the failure of the projects are very high (Cicmil, 1997). Different authors have been able to enumerate some of the reasons why projects tend to fail. These include inadequate knowledge of the needs of the stakeholders, lack of specification of project needs and constraints, setting unrealistic and unattainable objective, behavioral factors, bounded rationality in the procedure from project planning to execution, poor monitoring and control during the phase of the project implementation and inability to identify and plan ahead for risks that might be encountered before, during and after the project.

Comparative studies on the relative efficiency of various project approaches have lead to relevant contexts that deal with the suitability of different structures of facilitating or implementing a project. Studies have noted that the traditional or conventional functional organization is not sufficient the project is complex and needs a considerable cooperation and additional development effort (Greenfield, 1998). In this regard, the strategy only advised when the projects are constrained and involves minor transformation. On the other hand, project team's strategy was noted to be efficient in the completion of the project development. One of the aspects that must be considered to become successful in managing projects is the consideration of risks and the ability to use risk management approach.

Risk management refers to a systematic and organized decision making aspects that effectively identifies risks or uncertainties, analyses or assess risks, and efficiently reduce or eliminates risks to achieve project objectives (Ward, 2005). It is a management approach that deals with the project planning, leading, as well as managing and administering the use of the budget and resources of an organization so as lessen the risk of loss efficiently. Risk management is the approach of balancing the risk of losses from unexpected sources or reasons against the economic cost of protection. Managing risks needs effective decision-makers to have a thorough comprehension of the specific risks involved in a situation, the risk management principles and ideologies, and the consideration of effective and efficient risk management approach.

Specific projects need specific risk management approach to ensure that their project will be successful. However, these organizations should only consider effective and efficient risk management approach to make sure that risks are properly handled and solved. Effective or efficient risk management should follow three major process; assessment, the part in which risks are analyzed to know their potential effect on goals and objectives of the project; the mitigation phase the sets action planning to reduce risks and the contingency part or plans which arise so as to have another approach to be used if the risk management fails on the mitigation phase (McGrew & Bilotta, 2000). For instance, with regards to a project in information technology development, it is essential that the people involved in the project has the ability to determine the possible risks to encounter and use effective and efficient risk management to assure success of the project. It is a fact that project management, specifically with regard to the information technology attracts different risks before, during and after the project implementation. Accordingly an effective and efficient risk management plan also requires rigorous and intensive planning. The structure of the plan of the risk management approach is based on the four primary activities.

The first one is the process identification of risks. In this regard, to be efficient and effective in handling risks, the first aspect to do is to identify the risks. This aspect includes a continuous effort to determine and document risks since it can be helpful in analyzing risks. In addition, effective and efficient risk management also includes an estimation of the probability of the risks, its impact and also the timeframe of the risks, classification into sets of relevant risks as well as the prioritization of risks relative to each other. The second part is risk planning. Effective and efficient planning includes decision regarding what to do with the identified risks, which for significant risks will include the mitigation plans. The third part of the effective and efficient risk management approach is the tracking and controlling risks. These include the collection and reporting status data which tells about risks plans and taking corrective action as required. This part of the effective risk management approach is also known as the risk monitoring. The last part is the implementation of the identified solution to solve issues about the risks to make a project successful.

Part of the effective and efficient risk management approach is the proper dissemination of risk messages to all people involved in the project. The risk message must be from reliable sources so as to ensure that the information disseminated being relayed will be accepted and

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