Effective Risk Management in Projects

Anticipated Implementation Issues and Opportunities
Effective risk management is crucial for ensuring project success. This is true for not only large, complex projects, but also small and less complex projects such as renovating the kitchen at one’s residence. Kitchen renovation is a project that may involve substantive expenditure, hence the need for proper identification and mitigation of the associated risks. To this end, it is acknowledged that the major risks associated with kitchen renovation revolve around aspects such as contractor and project manager incompetence, budget overrun, delivery delays, theft of supplies, accidents and injuries, unfavorable weather, insurance inadequacy, and poor communication between stakeholders. With low to moderate likelihood of occurrence, these risks can be mitigated using strategies such as thorough evaluation of the contractor and project manager before selection, selection of a sufficient home insurance package, employment of a security guard, and ensuring effective communication. Nonetheless, implementing the formulated risk management plan may not be a straightforward endeavor as unexpected issues may emerge. This paper highlights the critical success factors as well as issues and opportunities associated with implementing the identified risk mitigation measures.
Critical Success Factors
Critical success factors (CSFs) are factors that must exist or go right for project success to be achieved (Project Management Institute [PMI], 2008). Most of these factors are usually beyond the project manager’s control. As must-haves, CSFs should be closely monitored throughout the implementation process (Kendrick, 2009). Three CFSs in this case include project funding, stakeholder commitment, and effective communication. Project funding basically denotes the financial resources required to accomplish the kitchen renovation project. For instance, funds will be required to procure construction supplies and hire sub-contractors. The project owner should ensure the required resources are available whenever required. This will be crucial for avoiding or minimizing delays in project completion.
Stakeholder commitment refers to the dedication of stakeholders to the project. The importance of strong stakeholder commitment cannot be overemphasized (Dinsmore & Cabanis-Brewin, 2011). It takes several stakeholders to accomplish a project: the client, the project manager, the general contractor, subcontractors, and so forth. In this case, key stakeholders involved in the project include the homeowner, the project manager, the general contractor, the insurance agent, and the security guard. Commitment from every one of these stakeholders will be important to the success of the project. Basically, commitment means that every stakeholder fulfills their obligations, duties, and responsibilities without fail. For instance, the homeowner should hire a competent project manager and general contractor to mitigate the risk of contractor and project manager incompetence. Equally, the project manager and general contractor are responsible for ensuring all safety precautions are followed all the time to avoid or minimize the occurrence of accidents. Without every stakeholder fulfilling their roles effectively, it will be difficult to complete the project successfully.
The other CSF is effective communication. This is an especially overlooked factor when it comes to project risk management (Kendrick, 2009). Communication essentially denotes the flow of information from one entity to another. Information must be effectively communicated to ensure everything goes as planned. The significance of effective communication in project risk management particularly stems from the fact that projects usually involve a multiplicity of stakeholders (PMI, 2008), like in this case. For example, it will be important for the project manager and the general contractor to communicate with suppliers in a clear and sound manner to ensure construction materials are delivered in the specified quality and quantity, and within the stipulated timeline. Also, the project management and general contractor should have a clear understanding of the homeowner’s expectations. This can be achieved through effective communication between the homeowner, the project manager, and the general contractor. Effective communication will also be vital for effective conveyance of duties and responsibilities, relevant precautions, as well as unexpected changes in aspects such as project scope, budget, and duration.
Implementation Issues and Opportunities
Risk management is not just about identifying risks and formulating measures to mitigate the risks. It also involves anticipating issues (Kendrick, 2009). Indeed, though often used interchangeably, the terms risks and issues do not mean the same thing (Kelly, 2015). Risks are essentially events that may or may not occur (PMI, 2008). In risk management, focus is specifically on what could go wrong. The project manager identifies events that could hinder the commencement, progress, and/or completion of the project. In other words, risk management is a “what if” analysis. In this case, for instance, what could happen if the general contractor does not have the prerequisite competence and qualifications, or what could happen if a fire accident occurs? The project manager explores all the possible scenarios and develops a plan to mitigate the identified risks.
Issues are, however, different, meaning that risk management and issue management are not exactly the same. While risks are events that may occur or may not occur, issues are events that have actually occurred (Kelly, 2015). In spite of a robust risk mitigation plan, some of the listed risks may turn out to be actual problems – issues. Often, there are unexpected or unknown events that catch everyone by surprise. Traditionally, risk management involves predicting possible risks mostly on the basis of past events (Kendrick, 2009). The problem with this approach is that history may not always correctly predict the future. This means that until an issue actually occurs, it cannot be said with certainty that it will occur. For this reason, it is not uncommon for project managers to take action only when a risk becomes an issue (Baker, 2007). Rather than employing a proactive risk management approach, project managers will often wait until the risk actually occurs. Nonetheless, such an approach can be problematic as it somewhat discourages the anticipation of contingencies. As a matter of fact, issues are best addressed before they occur.
One issue to anticipate with respect to the kitchen remodeling project is conflict between the stakeholders involved. It could be conflict between the homeowner and the project manager, between the project manager and the general contractor, or between the general contractor and suppliers. Conflict within the project environment is not a rare phenomenon (Dinsmore & Cabanis-Brewin, 2011). It usually occurs due to differences in objectives, priorities, and perspectives (PMI, 2008). For instance, typically, the objective of the homeowner would be to undertake the renovation with the least cost, but still get the best quality. The general contractor on the other hand would be concerned about the business value of the project. In other words, will the project be profitable or provide an acceptable return on investment? These are two conflicting objectives. To maximize profitability, the general contractor may lower costs by compromising quality. However, the general contractor’s attempt to maximize profitability may conflict with the homeowner’s objective.
An issue closely related to conflict is communication breakdown. Communication breakdown on its own is sufficient to cause conflict between stakeholders. It is quite common to experience communication breakdown during the course of project execution (Dinsmore & Cabanis-Brewin, 2011). Even with a comprehensive risk plan, communication failures occur frequently. The failures may, for instance, originate from ambiguity in communication, delays in relaying information, and/or use of an inappropriate communication channel. In this case, for example, suppliers may fail to notify the general contractor or the project manager of delays in the delivery of materials. The delays may be caused by factors beyond the control of the supplier, such as natural disasters. A delay in the delivery of materials would affect the project’s schedule and probably escalate the budget.
Other issues relate to machine breakdown and injuries. The project involves the use of equipment such as cranes. Machines can easily develop technical issues either naturally or as a result of human error. If equipment breaks down, a great of time may be spent repairing the machine, thereby affecting the flow of work. It may even become necessary to replace the damaged equipment. Working with machines may also lead to minor or major injuries on equipment operators. In this case, there may be injuries on the crane operator due to poor use of equipment. Injuries may also disrupt work flow.
Issues may not necessarily be negative – some may be positive. Positive issues are opportunities that may positively affect the project (Kahkonen & Artto, 2000). The project manager should as well be keen on opportunities during the course of project implementation. One of the risks identified in this case is the possibility of missing the project deadline. However, the project may be completed within a faster schedule than anticipated. Also, the renovation may be completed at a lower budget than expected. Another risk identified relates to delays that could be caused by subcontractors by delivering supplies past the specified date. Unexpectedly, subcontractors may deliver suppliers earlier. Such unexpected positive outcomes may lead to increased client satisfaction. The homeowner would most likely be happier if the renovation is completed faster and less cheaply, but still within the expected quality specifications.
Delivering the project faster and under budget may be beneficial for not only the homeowner, but also the project manager and the general contractor. For instance, the reputation of the project manager and the general contractor may improve, resulting in more clients. Also, due to timely delivery of supplies, the relationship between the project manager, the general contractor, and subcontractors may become stronger. As a result, the general contractor and the project manager may want to work with the subcontractors in future projects.
Though having a risk management plan enables the project manager to put contingencies into consideration, the plan may not always be useful when issues emerge. Accordingly, an action plan is crucial to minimizing the effect of issues on the project. The action plan specifically involves understanding the issue (what actually happened, who was affected, and so forth), communicating the issue to the project team or relevant stakeholders, finding a solution to the issue, and revising the risk mitigation plan to prevent recurrence of the issue (Kelly, 2015). An action plan is important for both negative and positive issues. For negative issues, the action plan should focus on minimizing the effect on the project, while for opportunities the plan should focus on making the most out of the opportunity. In essence, there should be responses to both negative and positive issues.
Conclusion
Overall, managing risk is not just about having a risk mitigation plan. It is not just about identifying risks and formulating strategies to manage the risk. An equally important aspect of risk management is anticipating issues and opportunities. In spite of the robustness of the risk mitigation plan, unexpected issues – negative or positive – can actually occur once the project kicks off. Accordingly, having an action plan for responding to issues and opportunities is essential. Opportunities could be particularly beneficial for the project in question and the stakeholders involved.


References
Baker, E. (2007). You've got way too many issues! Paper presented at PMI Global Congress 2007 – North America, Atlanta, GA. Newtown Square, PA: Project Management Institute.
Dinsmore, P., & Cabanis-Brewin, J. (2011). The AMA handbook of project management. New York: Amacom Books.
Kahkonen, K., & Artto, K. (2000). Balancing project risks and opportunities. Paper presented at Project Management Institute Annual Seminars & Symposium, Houston, TX. Newton Square, PA: Project Management Institute.
Kelly, R. (2015). Risks and issues – they are not the same. Retrieved from http://www.esi-intl.co.uk/blogs/pmoperspectives/index.php/risks-and-issues-they-are-not-the-same/
Kendrick, T. (2009). Identifying and managing project risk: Essential tools for failure-proofing your project. 2nd ed. New York: AMACOM.
Project Management Institute. (2008). A guide to the project management body of knowledge. Newton Square, PA: Author.