An existence of sophisticated ERP software like SAP, JDE, oracle, BAAN and PeopleSoft have finally brought the expectation of proponents of database managements systems up to 1980s, nevertheless, the expectations has been has been devastated in many ways due to lack of successful software implementation in an organizations for instance in the year 1995 U.S firms consume an estimate of approximately $60 million on the overruns cost IS projects and $ 80 million cost due to project cancellation. Moreover it has been projected to be approximately over 85 percent of ERP implementation is either out of budget or late (Chang, Kuo, Tzeng, 2015)
ERP implementations today is very different than the old system analysis and design. Amongst other important difference are the complexity, scale, organizational impact, the cost and subsequent impact in case of the project loss. ERP implementation affects entire organization whereas the traditional projects only affects part of the organization.
Another difference is that modern ERP requires personnel to master certain programming languages that comes with shift in the organizations computing archetype. Finally the implementation cost of ERP is very high as compared to the traditional projects. In case the organization failure it would may lead to termination organizations due to huge loses that would be incurred (Tarhini, Ammar & Tarhini, 2015).
The aim of this proposal is to identify regulatory issues in ERP implementation, with the objectives of finding ways in which an organization can reduce the business risk associated with implementation of ERP systems. Auditing of firms help in minimizing this risk by identifying the inherent risk, controlling and detecting any form of risk inside the setting through establishing an suitable and quantified level of whole risk auditing which is related to other risk (function of other risk). The similar rational may be used in ERP systems implementation. When we set the controlling and minimising major business risk as priority it would lead to a successful ERP system implementation.
In this report a case study would be presented to give a real life experience of how to facilitate controls that would help in identifying, controlling and minimizing risk associated with the ERP implementation. Finally we would be concluding thoughts concerning the regulatory issues ERP implementation.
2.1ERP Business risk implementation
Risk identification in projects information systems has been a subject of more research over the years. Examination of risk relates to a comprehensive thought for successful information that includes the gratification of the process of development, system use fulfilment, satisfaction of the quality of the system and the effects of information systems to an organization.
There are several risk associated with like system complexity, lack of experience, lack of clarification of roles, lack of support amongst others. The technological advancement affects the quality and satisfaction. System development is affected by the staff general expertise, and system used in some organization is affected by the user experience and clarity.
In order to increase the chances of success in an organization, the risk that are involved to any task must be minimized at all cost. An audit firm should try a means of minimizing audit failure risk through inherent identification, control and risk detection and then the establishment of acceptable, specific level of whole audit which is the source of other risks. The same holds when implementing an ERD system, so as to increase the likelihood of success, risk should be acknowledged and also appropriate control measures must be put in place in order to eliminate this risks (Altamony,Al-Salti, Gharaibeh & Elyas,2016).
Absence of alliance between a business strategy, process and structure and also the selected ERP application among the risk that area frequently repeated according to literature. Both the literature of ERP and the business process reengineering stats that the ERP alone is not sufficient to improving a company’s performance unless the organization reforms the process of its operations (Imbir, Jarymowicz, Spustek, Ku? & ?ygierewicz, 2015). Further, ERP project implementation should be an initiative for business. This necessitates an organization to achieve strategic clarify which would make it deliver value and finally an orientation will be required to achieve the set goals.
In summary based on ERP literature reviews it exist five major risk that are reported against ERP implementation. This are
The above risk would be discuss in details in under the EPR Implementation control in chapter 3 below
2.3 ERP controls implementation
3.41 lack of the system alignments in business processes
For an organization to reduce risk associated to the above risk an organization should reengineer business processes, create an inclusive needs specifications, carry out the system test of ERP systems application and thoroughly observe performance of the system.
Primarily, the radical redesign and the rethinking corporate process allows an operations organizations procedures to be stressed by the ERP systems and enables the business to enjoy full benefits that are given by ERP systems. It may also upshot to ERP implementation instigating as business opportunity.
3.42 lack of regulatory controls because of decision making decentralization
Through steering committee formulation, sponsor appointment and, involvement and internal audit an organization my reduce loss of controls that is linked to decision making decentralization.
The steering committee allows the senior administration to monitor directly the decision making of the project team, the team always gives approval rights and ratification on all important decisions, thereby safeguarding the project team procedure of decision making, moreover, apart from devising the steering committee, the project sponsor is granted direct control accountability over ERP progression of .
ERP projects and they are mostly responsible for protecting findings more so in a situation where huge funds are required than that was given during budgeting. Auditing of ERP system also helps in ensuring that it exist adequate control in all departments and accomplishing the required tasks appropriately within the given time span.
Through steering committee formulation, project sponsor appointments, involvement of in audit controls helps business organization to avoid risk that is associated with implementation of ERP systems.
2.4 complexity of the project
Reducing perils linked to mission convolution fundamentally rely on the preparation of directing board, high-ranking support managers, selection of the project patron, the progress of a exhaustive execution strategy, the project management and the project team that have ample skills, and participation by mentors and interior audit.
When dealing with ERP system execution schemes, the high-ranking managers are usually involved through selection of the projects steering committee. When the senior management team are directly intricate in system implementation, it increases the project perception and gives advantages to an organization and encourages employee, the system handlers and the information technology department will also to be aggressively involve in and giving support for implementation of ERP systems.
By engaging the executive-level workers that have wide familiarity of the organization’s procedures. Management should have always monitor the implementation of ERP systems. When an organisation is appointing project sponsors it needs to emphasize on adequate accountability so as to reduce the project risk.
In order for the organization to retain control over its projects, it should develop comprehensive system implementation design that would give direction to the project team by outlining the project targets and goals. The system plan may include performance metrics for successive evaluation which would assist in identification and evaluation of potential risk that may result from delays.
The detailed needs of specification requirements may force the organization to upfront and identify the ERP project specifications and comprehend flat of complexity.
Project management is important in to the achievement foe any big endeavour, and this especially happened in ERP projects implementation that may last for a long period of time and cost a lot of money.
Identification of knowledge and skills of the ERP project team is crucial because it helps in recruiting of consultants that would help in providing expertise in parts where the team members of the organization lack knowledge.
Finally it is very important for the project consultants and the project team to be allocated the ERP schemes in full time basis with isolated office ERP projects thus ensuring that they can concentrate completely with the designing of projects. Eventually. The involvement in internal audit would be very important in potential risk identification, risk management, and being sure the interior controls effectiveness.
All of these categories of ERP controls plays a vital role in reducing perils associated with 2.5 ERP projects complexity.
To summarise all these, reduction business risk link to project complexity relay on the designation of the management committee, support by senior management, project sponsor appointment, comprehensive specification requirements, comprehensive plan development, the possession of adequate skills by the project team, consultants involvements and the core audit.
2.6 lack of skills
Consultants would be in a position to utilize their past experience in the implementation of ERP skills; subsequently, they may turn to be acquaintance benefactors who lesser the knowledge scarcity that exist in the societies .The organization, though, may cannot fully bank on experts to instrument ERP system, because the consultants have a restricted familiarity to organization’s procedures. Hence, a handy and strong working relationship amongst advisors and the organization’s scheme .A close operational relationship between consultants and the officialdom’s project team can tip to a cherished skill transfer in both guidelines.
Moreover, preparation that is available via the resource the professionals, the vendor, or via some third party provides a valued resource to develop abilities that are requiring in-house. These joysticks are vital in reducing the threats associated with a possible lack of in house aids. Super users a group generated thru the ERP execution. The traits secure understanding of the fresh comprehensive organization process and the procedural knowledge of the system via the enactment happenings and teaching they obtain.
The involvement of exterior ERP consultants in system venture, the formation of a good working relationship among plan team and the consultants, and passable preparation are precarious factors in overwhelming business risks that are associated with the absence –interior capabilities.
2.7 ERP system resistance by users
User resistance is always obvious in any category of change more so on the projects of ERP system becouse4 users would be very worried that there work might be eradicated, or at good be altered from the typical procedure of accomplishing tasks. The employees in this case might be reengineered from their locus and are afterwards diverted in the company and the organization might move in a grief-stricken process that would result to low productivity Subsequently, a company frequently implement some strategies o risk managements that would help to reduce these user resistance (Mahmud, Ramayah & Kurnia, 2017).
(Tenhiälä & Helkiö, 2015) argued that the project managers common skills are such as team building and communication are amongst the basic crucial skills that is required in creating a successful ERP system. The involvement of users when creating an ERP system is also very important, this would assist the project team to know about the users requirements and address their concerns (Barry, Fogarty, Blasio & Karamacoska, 2018). Moreover, apart from the user involvement, training of users would help them in acquiring requisite skills that assist in applying the ERP systems (Menezes, O’Neil, Guimaraes, Rangel & Gimba, 2016).
ERP application hazards and the concomitant controls are illustrated in the fig 1. The table columns shows when control is pertinent for lessening the threat associated to the ERP implementation package.
3.0 Case study
3.1 collection of data
We used the case study of NFMS ‘’ University’s New Financial Management Systems. The case provides a ridiculous settings for examination of implementation of ERP systems and its collaboration with factors of various organization. To gain the understanding of NFMS projects, we used multiple collection of data that includes interviews, archival information sources and surveys were utilize in the study. The table below shows ERP risk implementation and associated controls (Chang, Kuo, Wu,& Tzeng, 2015).
Four interview meetings were carried out:
The DFS, Business Analyst, System Analyst and the ITS were the senior staffs of the university. Consultants came from the consulting team for the big-five. The university subcontracted the internal audit facility to diverse Big-Five bookkeeping organization, and high-ranking internal auditor ‘director of that Big-Five’ included in NFMS auditing) took place in the study (Cheng, Tao, Xu & Zhao, 2018).
NFMS website was critically accessed for collecting data concerning the NFMS project, the DFS was also provided with the copies of reports given to the directors and papers that are associated to projects. This data assisted so much in giving additional richness and background, clarified ideas to be presented in the course of interviews, and give an extra quantitative records which assist in understanding processes applied in this setting (Ptak, & Schragenheim, 2016).
3.2case setting
In 1980s the institution had fixed an embalmed financial application of ‘Old Financial Management System (OFMS)’. This solicitation was deeply modified so as to provide the precise requirements to the institution (Ge, & Voß, 2009). Throughout 1980s, it converted ostensible which OFMS was not in a position to achieve the requirements of the university. Response by the users shows that OFMS was not able give accurate and appropriate information; furthermore, it was not friendly ‘character rather than windows based’ which gives stumpy quality reports. Likewise, the OFMS did not combined to any other information systems that operates inside the institution, and was not able to grip the progressively composite and developing the structure of the campus (Hamidi, 2018).
The University management gives decisions that NFMS project offered a chance to appraise and ominously re-engineer financial operational procedures to advance efficiency (Chofreh, Goni & Klemes, 2017) the ordinance concerned to this monetary operative progression evaluation and the restructure perform the following needs.
In the year 2000, the campus granted the indenture to a “Big Five” accessing institution that proposes installation of modern type of ERP package. Furthermore, firm further approved to providing support to the implementation, constant consultation backing and establishing teaching conferences for the system users the project team (Kerzner, & Kerzner, 2017).
The NFMS project was implemented in the year 2005, having faced some delays. The senior managers and the project manager of the institution were mostly happy with NFMS scheme. Due to significance of NFMS application of ERP, fiscal transaction dispensation errands were decentralised every department and dissection level. The campus’s economic strategies are currently premeditated to eradicate the old labour-intensive and paper intensive operative processes.(Voronkova, Kurochkina, Firova, & Bikezina, 2017).
3.3 Results
The interviewees proposed that the BPR development team affiliates’ knowledge and skills; the mentor’s contribution, post enactment appraisal, in-house assessor’s participation, creation of the directing board; decision-making skills; and educating users was very important in reducing risks alleged to be linked to the NFMS plan. All the serious controls shown in the study and the allied minimization of risks were pertinent for NFMS project accomplishment (Brunnert,& Krcmar, 2017). The interviewees, though, also point out, the in-depth project planning and the transformation management skills which is vital for abating the risk of deficiency of triumph of the NFMS venture (Antero, 2015).
The advisors thought that venture proprietorship the intended users was vital for the ERP project to advance the users’ acceptance and support. The consultant stressed the significance of the “ownership” of the ERP system by asserting. Before system implementation, teaching were carried out for all NFMS operatives to guarantee that they acquire skills that are required to run the NFMS (Lyytinen, & Newman, 2015).
3.4Concluding of thoughts
The purpose of this report was to ascertain regulatory issues associated with ERP system implementation in an organization. The extant case study on the ERP systems and real life systems development hazards were utilized to examine risks and controls that are connected to successful implementation of ERP system in the case study of a firm. The case study gives support to risks and controls recognized in literature. It also permits for the outlining numerous new controls (Mahmud, Ramayah & Kurnia, 2017).
The research gives evidence of risk that are associated to implementation of ERP systems, furthermore is valuable in gaining the understanding of determining whether risk and controls occur on organizational settings, determining correlation between risk , the ERP implementation, business risk and finally the research may help management of risk and auditing of ERP systems (Tian, 2015).
4.0 summary and overview of other teams selected topics
Enterprise Resource planning (ERP) is a software that is used by business process management team to enable the organization to utilize a system of incorporated applications to automate business functions associated to human service and information technology, and manage business processes (Seethamraju,2015).
4.1 Risk management and audit of ERP systems
Corporate governance generates heated debate then noticeable disasters of accountability have been stressed by the fiscal scandals and economic crisis. Definitely, the interior audit work has engrossed the devotion of boards and those that are facing peripheral burden for assurance concerning the corporate practices. Internal auditing receives care unlike before. The international emphasis on the necessity for thorough corporate governance that has resulted to an increase in the interest for internal audit function (Shen, Chen & Wang, 2016))
ERP systems implementation is like the catalyst to internal audit task change by influencing the internal risks and its control within the organisation (Tanner, Morgan & Luck, 2015).
4.3 implementation of cloud based ERP systems
A cloud-based computing enable customers to accessed software application that run on a shared resource of a computing like memory, processing power, disk storage and memory. These resources are always maintained remotely by data centres that are hosted by various application platforms.
Cloud ERP allow users to contact the enterprise resource planning over a network.
The advantages applying cloud computing on ERP are as follows
ERP enables business practises in finance, distribution, manufacturing, sales and areas. That Extended ERP involves business processes. Integration by ERP is typically needed to reduce redundancy of information and other business process (Chien, Hu, Reimers & Lin, 2007).
5.0 References
Altamony, H., Al-Salti, Z., Gharaibeh, A., & Elyas, T. (2016). The relationship between change management strategy and successful enterprise resource planning (ERP) implementations: A theoretical perspective. International Journal of Business Management and Economic Research, 7(4), 690-703
Antero, M. C. (2015). A Multi-case Analysis of the Development of Enterprise Resource Planning Systems (ERP) Business Practices. Morten Friis-Olivarius The Associative Nature of Creativity.
Barry, R. J., Fogarty, J. S., De Blasio, F. M., & Karamacoska, D. (2018). EEG phase states at stimulus onset in a variable-ISI Go/NoGo task: Effects on ERP components. Biological psychology, 134, 89-102.
Brunnert, A., & Krcmar, H. (2017). Continuous performance evaluation and capacity planning using resource profiles for enterprise applications. Journal of Systems and Software, 123, 239-262.
Chang, B., Kuo, C., Wu, C. H., & Tzeng, G. H. (2015). Using fuzzy analytic network process to assess the risks in enterprise resource planning system implementation. Applied Soft Computing, 28, 196-207..
Cheng, Y., Tao, F., Xu, L., & Zhao, D. (2018). Advanced manufacturing systems: supply–demand matching of manufacturing resource based on complex networks and Internet of Things. Enterprise Information Systems, 12(7), 780-797.
Chien, S. W., Hu, C., Reimers, K., & Lin, J. S. (2007). The influence of centrifugal and centripetal forces on ERP project success in small and medium-sized enterprises in China and Taiwan. International Journal of Production Economics, 107(2), 380-396.
Chofreh, A. G., Goni, F. A., & Klemes, J. J. (2017). Development of a framework for the implementation of sustainable enterprise resource planning. Chemical Engineering Transactions, 61, 1543-1548.
Ge, L., & Voß, S. (2009). ERP application in China: An overview. International Journal of Production Economics, 122(1), 501-507.
Hamidi, H. (2018). A combined fuzzy method for evaluating criteria in Enterprise resource planning implementation. In Intelligent Systems: Concepts, Methodologies, Tools, and Applications (pp. 639-670). IGI Global.
Imbir, K. K., Jarymowicz, M. T., Spustek, T., Ku?, R., & ?ygierewicz, J. (2015). Origin of emotion effects on ERP correlates of emotional word processing: the emotion duality approach. PLoS One, 10(5), e0126129.
Kerzner, H., & Kerzner, H. R. (2017). Project management: a systems approach to planning, scheduling, and controlling. John Wiley & Sons.
Kumar, V., & Reinartz, W. (2018). Customer relationship management: Concept, strategy, and tools. Springer.
Lyytinen, K., & Newman, M. (2015). A tale of two coalitions–marginalising the users while successfully implementing an enterprise resource planning system. Information Systems Journal, 25(2), 71-101.
Mahmud, I., Ramayah, T., & Kurnia, S. (2017). To use or not to use: modelling end user grumbling as user resistance in pre-implementation stage of enterprise resource planning system. Information Systems, 69, 164-179.
Ptak, C. A., & Schragenheim, E. (2016). ERP: tools, techniques, and applications for integrating the supply chain. Crc Press.
Seethamraju, R. (2015). Adoption of software as a service (SaaS) enterprise resource planning (ERP) systems in small and medium sized enterprises (SMEs). Information systems frontiers, 17(3), 475-492.
Shen, Y. C., Chen, P. S., & Wang, C. H. (2016). A study of enterprise resource planning (ERP) system performance measurement using the quantitative balanced scorecard approach. Computers in Industry, 75, 127-139.
Tanner, D., Morgan?Short, K., & Luck, S. J. (2015). How inappropriate high?pass filters can produce artifactual effects and incorrect conclusions in ERP studies of language and cognition. Psychophysiology, 52(8), 997-1009.
Tarhini, A., Ammar, H., & Tarhini, T. (2015). Analysis of the critical success factors for enterprise resource planning implementation from stakeholders’ perspective: A systematic review. International Business Research, 8(4), 25.
Tenhiälä, A., & Helkiö, P. (2015). Performance effects of using an ERP system for manufacturing planning and control under dynamic market requirements. Journal of Operations Management, 36, 147-164.
Tian, F., & Xu, S. X. (2015). How Do Enterprise Resource Planning Systems Affect Firm Risk? Post-Implementation Impact. Mis Quarterly, 39(1).
Voronkova, o. v., Kurochkina, a. a., Firova, i. p., & Bikezina, t. v. (2017). Implementation of an information management system for industrial enterprise resource planning. Revista ESPACIOS, 38(49).
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