A critical evaluation of the broader implication of risk to organizations
Risk refers to the exposure of a company to a potential threat during its operations or after undertaking a certain project. Risk includes all negative events that hamper the timely completion of a project. Before investing in any project, managers should use their risk assessment skills and assess the potential threats that may interfere with the process (Meredith & Mantel 2012). Risks can be internal or external and the ultimate effect is redundancy in executing a project, thus resulting in losses to the affected business. Therefore, risks must be identified and assessed and strict measures formulated to mitigate them.
Business managers should be well versed in risk management principles to keep up with the ever-changing business environment. Risks ought to be assessed before embarking on the implementation of any project to avert the chances of the business incurring losses (Larson 2011). The identification, examination, and assessment of these hazards and vulnerabilities require the understanding of the various project management tools. For businesses to remain profitable and competitive in the evolving business environment, it has to put in place a risk management strategy. This aspect ensures that risks are identified and assessed in advance and proper management policies implemented. Risk assessment involves three major phases, viz. identification, analysis, and evaluation (Vermeirea et al. 2007).
The identification of risks – Risk managers have to be keen especially in the identification phase to ensure that all the potential risks are identified thoroughly. This phase involves a systematic and comprehensive process that uncovers all the risks. All the risks identified in this stage should be recorded and their sources defined.
Analysis of the relevant risks – This phase involves the assessment of the impacts of the risks on the business (Larson 2011). It involves making decisions on whether the risks so identified should be treated coupled with determining the best cost-effective method to mitigate the risk.
Risk evaluation – In the evaluation stage, managers determine the specific risks that require mitigation and their priorities (Vermeirea et al. 2007).
How project managers can learn lessons from these broader studies
Project managers can use different approaches in the identification, analyzing, and evaluation stages of risk management. Managers need to formulate a project schedule before the commencement of a specific project. A project schedule outlines the sequence of events and before allocating time for each activity (Cooper et al. 2005). Project scheduling is done through getting tools, which include the project scheduling software that guides managers throughout the process. Network diagrams are also important tools for project scheduling. The process involves representing project activities in a diagram illustrating the sequence and timeframe for each activity. It is important to note that some activities are dependent on others, and thus they must be sequential. Through a network diagram, project managers are in a position to identify the longest and the shortest possible completion time for a project (Larson 2011).
Knowledge regarding critical path is equally important to managers since it is subject to changes. It can extend or shorten depending on the project risks (Cooper et al. 2005). Also, PERT diagrams assist managers to assess the possibility of shifting certain activities, not in the critical path. These tools are explored for the risk managers to acquire knowledge on risk management (Meredith & Mantel 2012).
Project planning is another essential component of risk management since it sheds light on the number of resources required for the successful completion of a project (Ahmed, Kayis & Amornsawadwatana 2007). Planning may be done through project planning tools, which are available to project managers. Knowledge of the usage of the tools is essential to such managers since it makes planning fast and accurate. Tools used for planning include the project planning software, which is well used, may help managers to plan on matters of cost, budget management, and quality control and at the same time assess risks that may come along the way (Larson 2011). Cause and effect diagrams are other essential tools for risk managers. The diagrams identify a problem before trying to establish the relationship between the problem and its causes. This way, risks are identified, analyzed, and proper tools are devised to avert the risk. Other tools that may help managers at the planning stage include flowcharts, check sheets, Pareto diagrams, histograms, and scatter diagrams. Therefore, these lessons are essential to risk managers since they avail of project management knowledge, which may be useful in eliminating project risks.
The gaps in these studies relating specifically to the planning of risk in projects
Despite the lessons having great significance to risk managers, they have certain limitations that make them less educative. The risk management tools identified by the studies do not outline the specific ways to identify and mitigate risks. They only offer guidelines for risk assessment, but they are not specific to the precise ways of identifying and managing such risks. Also, the lessons overemphasize planning about time, cost, and resources and they overlook the risk aspect, which is important in project management. In a bid to utilize the tools identified in the studies, one should have adequate knowledge of their usage. There is no direct connection between the literature contained in the studies to risk identification and management. Lastly, risks vary from one project to another depending on the nature and timing of the project. The tools proposed in these studies do not recognize this fact and they only provide guidelines on their usage.
Reference List
Ahmed, A, Kayis, B & Amornsawadwatana, S 2007, ‘A review of techniques for risk management in projects’, Benchmarking: An International Journal, vol. 14, no. 1, pp. 22-36, Web.
Cooper, D, Grey, S, Raymond, G & Walker, P 2005, Project risk management Guidelines – managing risk in large projects and complex procurements, Wiley, Chichester, Web.
Larson, E 2011, Project management: The managerial process, McGraw Hill, New-York, Web.
Meredith, J & Mantel, S 2012, Project management: a managerial approach, John Wiley & sons, Hoboken, Web.
Vermeirea, T, Munns, W, Sekisawac, J, Suterd, G & Van der Kraake, G 2007, ‘An
Assessment of Integrated Risk Assessment’, Human and Ecological Risk Assessment: An International, vol.13, no. 2, pp. 339-354, Web.