Management of a project involves many activities that are undertaken before, during and after the project. Risk management is one of these activities that are undertaken in project management. Risk management is, therefore, a practice that involves activities that a project leader should integrate and focus on. Systematic practice is needed in project risk management under specific approaches that are applied to different levels depending on the complexity of the project and its embedding risks. Risk management should, therefore, be treated as an independent practice in the project by identifying, mitigating and fixing all the issues that are considered as risks to all the other activities set by the project.
Reports based on recent investigations done on the increased rate of project and systems failure and financial meltdowns show that poor risk management in the planning and infrastructure among other stages of the entire project and systems implementation is the main cause (Abbasi et al., 2014). Consequently, risks management in the systems level has grown to be one of the most blazing issues in project management. This is because poor risk management plans and processes are now counted as the main aspects contributing to the failure of most systems and projects. Most experts and scholars that have conducted research in this field have reported that effective and efficient risk management processes tend to reduce inherent problems in project management (Scolobig et al., 2015). The success of projects depends on the application of an effective risk management plan at the systems level and combining this plan with proper project management and scope.
The success of projects owing to the implementation of effective risk management processes results from the fact that this aspects reduce or rather eliminates chances of unexpected and surprising project risks within the project or system cycle (Meunier and Bakker, 2016). On the other hand, overlooking any chances of risks in the entire project implementation cycle can bring about multiple costs and problems that may result in the failure of the projects or systems. Increased level of poor risk management processes has resulted from the drastic technological growth and development which demands accuracy in intelligence when initiating a risks management plan (Cagliano, 2015). As a result, the purpose of this paper is to research and ascertain the current trends in the theory and application of risk management at the systems level.
An example of a project that failed due to poor risk management is the British Petroleum Spill. As it is with most organizations as a result of the ever-changing and dynamic situation in today’s economy, they have had to implement and adopt new strategies with a view to remaining competitive and relevant in the market. In regard to this project, the oil spill resulted in a situation that was not only crucial but also new to most oil companies all over the world. This is one of the most expensive disasters and oil spill accidents in the modern era. As a result, this crucial situation required fundamental and strategic management decisions with a view to effectively reach a solution to the issue. The British petroleum company is the sixth largest oil company operating in more than eighty states in the world.
In its operations, an explosion in the Gulf of Mexico resulted in the oil spill that resulted in extreme damage and losses not only to the company but also to lives and the environment. Building on the case study, it is clear that the damage caused by the oil spill resulted as a result of failure to implement effective risk management plans to mitigate such matters on the onset of such an occurrence (Arora and Lodhia, 2017). The company also took quite a lot of time trying to stop the oil flow since they did not have the right equipment to stop the flow. The major reasons that resulted in the project failure were weak risk management plans, lack of planning, poor timely decisions, and undermining the situation by the management of the organization among other reasons (Wright, 2015). Among these reasons, however, poor risk management plans and processes are the main aspects that resulted in the failure of the project (Aven, 2016). This is because the management had put forth weak risk management plans and these also went wrong upon implementation processes.
According to Xiong et al. (2015), in a study whereby he reviews some of the most common inherent risks and management plans in the oil industry, it is clear that poor risk management plans are one of the main aspects that result to project failures in this sector. In most cases, oil and gas companies focus and project most of the risk management plans to upstream activities overlooking the downward activities. Poor decision making in such cases results in immense losses in the oil and gas industries. In a similar research conducted on the British petroleum project failure, Tabibzadeh and Meshkati (2015), states that the incident with the company resulted from poor operational risk management. This is because the executives and management of the organization placed very low priority on safety measures based on safety risks that at times happen in such organizations.
In addition, the article asserts that the management of the organization during the occurrence of the issue appeared to know very little about some of the most crucial front-line operational risk management plans. The management of the organization ignored some of the most crucial safety issues and appropriate risk management plans hence the occurrence of the incident (Peters et al., 2018). Overlooking of the necessity of effective risk management is considered as the main aspect and cause of the problem and failure of the project (Teixeira et al., 2015). As a result, this made the company’s project quite vulnerable to some of the safety and operational risks. Based on the catastrophe theory, it is clear that the oil spill disaster of the British petroleum most certainly resulted from the poor response transitions to the safety parameter changes (Pranesh et al., 2017). This is because the systemic shift occurred in critical parameter values leading to different properties of the company’s systems. As it is per the theory’s argument, the distribution of the effects of the oil spill resulted in cascading effects on the company and also the environment.
The risks management system dynamics were quite poor hence the extreme oil spill resulted from this failure rather than from unexpected and unplanned external risks. The self-organization of the company in regard to safety issues was also poor hence resulting in the critical tipping point of the oil spill. This posed a challenge to the operation, design, efficiency, and reliability of the risk management systems in the organization (Hornstein, 2015). Other aspects of the dynamic systems in the organization that resulted in the project failure included delayed responses and randomness that resulted to the sensitivity of the issue hence poor management of the incident. The incident also resulted in cascading effects that resulted in a state of disequilibrium since it happened in an undistributed size. In addition to this, the organization also suffered financial meltdown since the spill resulted in a lot of financial losses in terms of costs of mitigating the risk and also losses on profitability (Marcelino-Sádaba et al., 2014). It also resulted in crowd disasters since numerous lives were lost as a result of the spill.
Other consequences that resulted from poor risk management within the organization was unrealized benefits. The incident killed the anticipated project benefits that were to be accrued by the organization, had the risk not happened. This is because the oil spill resulted in losses and in addition, resulted in additional expenses hence negatively affecting the profitability of the project. On the same account, the mitigation expenses that the organization incurred in order to mitigate the oil spill resulted in overspending in terms of the budget cost that had been set aside for the project. The reputation of the organization was also damaged as a result of the incident. This is because it was clear indication that the entity had not put forth effective risk management plans to respond to safety issues that may have resulted.
This resulted in immense losses and environmental damage hence negatively affecting the brand name. Ultimately, failure of the risks management at system level resulted to project failure. Consequently, the objectives of the organization with regard to the project were not accomplished. Due to the numerous effects that this oil spill caused, the organization suffered intense cascading effects. This negatively affected the organization which was a clear indication that the organization did not have an appetite for these consequences. Even after the occurrence of the incident, the management of the organization failed to implement effective risk management plans with a view to mitigating any future occurrence of such safety issues.
In a position as that of a project leader, there are many approaches that I would uphold in terms of approaching the risk management process to the issue that I have put across in this paper. The management of risk approach that I would choose therefore would be one that specifically initiates all the perspectives of risk management and other many considerations that have to be made in cases of risks in a project. In this case, this process would include the processes of risk assessment and a specific mitigation strategy through which the risk would be approached in a safer way. In the risk assessment step, I would specifically consider the identification of all the issues pertaining to the risk and then the evaluation of any potential issue that would come along with the risk.
On the same note, the mitigation approach would also consider a design that would work to the elimination of and the minimization of the various impacts that are attached to the same risk and the issues surrounding the same risk more so when they are not dealt with (Bromiley et al., 2015). In this project, these issues would be the ones that would delay or have a negative impact on the project. The process of risk identification of a project like this one would call for a disciplined and creative approach. For the project leader, the most considerable way through which the risk identification would be perfect is the consideration of the creative brainstorming sessions in which everything that could go wrong can be listed for the same process. From these ideas that are most welcome, I would then focus on the evaluation stage having in mind that everyone has presented their fears.
In the risk identification process, there are various things that I would consider. First I would have a more disciplined approach on the same by considering the use of checklists of all the potential risks presented which would then help me in finding the likelihood of the same things happening during the project. The checklist would also involve issues from past experiences. As a project manager, this is the key strategy to help identify the risks and also expand the teams thinking capacity. The source of all the risks is another way that as a project manager I would be keen on to consider. Categorizing all these sources and exploring some of the many risks that are related to the project would be a key strategy that would help build a way forward to the mitigation of the risks. For this project, I would apply a similar framework of risk management referred to as the work breakdown structure in which I would develop my risks through a risk breakdown structure to mitigate all other issues that would affect the project negatively. Through the risk breakdown structure, I would be able to organize all the risks that I have identified in the first step into specific categories that would entail the use of a table or a detailed figurative approach.
The identification of risks opens up the next step on the assessment of risks. In this step, I would clearly consider some specific areas. The probability of occurrence is one of the areas to c consider before we start the evaluation process. The other area to consider is the potential loss that might come along with the same risks. As a project leader, I will have in mind that not all risks are equal since some have a high probability to occur while others have a high-cost loss associated with them.
The risk evaluation, therefore, will follow a criterion that will entail the high risks and the low risks associated with the project (Giannakis and Papadopoulos, 2016). As a project manager, the critical risks are something that can never be left out in any project and thus those risks with high impact will be the first to consider. In my quest for risk mitigation, I will specifically develop an understanding on the impacts that will come along with some of these risks and then present a critical view of every possibility and mitigation strategy for the same.
Since there exists a positive correlation between the increase and the decrease of project complexity and the project risk. As a project manager, I will have in mind that a project like the one I am leading will take into consideration some of the emerging technologies and this will make it necessary to have a strategic control of the various risks that the project may be exposed to by the same technologies. This project is therefore bound to have a high-complexity rating due to the corresponding inputs and the risks associated with the same (Alaray, 2016). In managing such situations, I will ensure that the resources needed for the project are available and readily provided to cut off some of the unexpected issues during the project. The risk evaluation that I will undertake therefore will feature a workshop set up in which I will rate each risk as a medium, high or low. Building on the same I will then address the various issues of these risks that need a higher and closer consideration for the mitigation process so that the project can be safe.
After I have considered all the risks, identified them, and then evaluated them, the next step will be mitigating the risks through a specific plan that will build on reducing the various impacts on any unexpected occurrences. The mitigation plan, therefore, will take into consideration various ways including risk avoidance, reduction, sharing, and transfer (Torp, 2015). By using all these mitigation techniques I will be ensuring that the tools are effective for minimizing and mitigating the risks both on the individual level and for the project profile. The mitigation plan that I will be initiated, therefore, will be based on each and every risk event that the project faces. The various actions that need to be undertaken in case this issue is faced will also be incorporated in the same plan. Risk avoidance for this project would, therefore, involve the alternative strategy development in which I would consider some of the basic alternatives that would have success to accomplish the project’s objectives.
In this project, the best way what I would approach this would be through the adoption of proven and existing technology for the project. When it comes to the risk-sharing strategy, I would consider partnering with other projects that would share the risky activities with my project. Risk reduction, on the other hand, is only possible through the funding and investments on the risks (Taroun, 2014). Investing in some of the risk sources would reduce most of the impacts that come along with these risks. Risk transfer on the hand would involve shifting some of these risks to other projects that would be at an upper hand of dealing with the same risk than my project. In this project, the most effective way would be shifting the risks to an insurance cover in which the company would deal with the same risks for the project. Some of the risk transfers that this project would make use of would involve most of the risks that are associated with unexpected losses.
In the contingency plan that I would employ for this project, it would be based on the balancing of the mitigation investment and the benefits that are specifically set by the project. Since some of these risks may frustrate the accomplishment of the project goals development of an alternative approach to deal with this is necessary. The project will, therefore, have some funds set aside for the project development on some of the unseen events. The contingency funds will, therefore, cover and accommodate all the events that might arise in the future (Helbing, 2013). As a risky strategy, the contingency plan in this plan will entail a systematic way in which the project costs will be kept in check and the analysis of the budget also closely monitored as the project continues. The scheduling of activities may also be an issue since as the mitigation of the risks takes place, some activities may be altered and others shifted. The contingency plan, therefore, will help cover the specific changes and provide a setup that would help cover the same gaps accordingly. As a project manager, this would the clear strategy of risk mitigation that I would entail together with the contingency plan in case of any plans that might be affected by the same processes.
Conclusion:
Given the fact that risk management is the strategic process whereby the management of an organization initiates the process of identifying various project or system risks and taking reasonable steps to ensure that the risks are reduced to an acceptable level. The approach taken in risk management determines the various processes, tools, techniques, and responsibilities of the risk management team for a specific system or project. In addition, a risk management plan clearly details how risk management processes are structured and performed. Risk management approaches are aimed at operationalizing management goals and objectives in regard to specific projects. Since no projects or systems are similar, risk management plans should be strategized and tailored as per a project’s scope and complexity.
Risk management at the system level mainly focuses on development. This is because project or system risks exist in requirements, operations, integration, fielding, and testing. Complexity and governance risks are very prominent at the enterprise level. Consequently, it is the responsibility of system project managers to initiate effective risks management at the system level. They should do this with a view to develop and integrate approaches that are meant to reduce risks. Implementation of poor risk management at the system project level is in itself a risk since it opens up to potential consequences that may pose negative cascading effects on the organization. Management should, therefore, implement effective and efficient risk management plans and processes with a view to mitigating any potential risks that a project or system may suffer. By so doing, the management will be ready to initiate mitigation processes in case a risk happens.
References:
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Alaray, N., 2016. A Governance Approach: Exploring the PMO Characteristics on Project Success and Failure (Doctoral dissertation, The British University in Dubai (BUiD)).
Arora, M.P. and Lodhia, S., 2017. The BP Gulf of Mexico oil spill: Exploring the link between social and environmental disclosures and reputation risk management. Journal of Cleaner Production, 140, pp.1287-1297.
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