Answer

Critical assessment of the Effectiveness of Risk Management Approaches

Introduction

Project planning and design are at the inner core of the heart of every life cycle of every project; it informs and gives direction to the stakeholders on the path the project is taking and how to arrive at the intended objective or goal (Carmichael, 2006). It incorporates the planning of the deemed steps required to realize the intended objectives by further pinpointing in-depth the detailed activities and resources necessary to bring the project to a conclusion (Zwikael, & Globerson, 2006). In the same breath, it calls for the documentation of the plans of the projects, defines the deliverables and the main requirements of the project, and squarely creates the schedule of the intended project in a manner that guides the team in the implementation and closure process easily.

Project planning and design play a great deal when it comes to the management of time, risk-related issues, equipment and resources needed, the cost involved, the quality needed in the project; aids in controlling staff and external protagonists to ensure effective delivery of the project in time within a specified schedule and budget (Harris, 2011). Planning for probable risks and making an allowance for optional contingency plans and procedures to mitigate risks is at the core of planning processes. Effective risk management calls first and foremost for the identification and critical analysis of risks that the project entails (Zwikael, & Ahn, 2011). This is of paramount importance because one cannot handle risks without characterizing them to get to the full knowledge of what they are and their impact on the first step.

As uncertainty increases in project planning and design, there is also a highly anticipated increase in the planning effort and duration, project budgets, increase in the number of design cycles and design reviews, activities in the planning system, delayed final design, and increase in quality management effort among others. This could be mostly exacerbated when skills and techniques that are fitting to low-uncertainty projects are applied to high-uncertainty projects without focusing on risk assessment and risk characterization approach during the decision-making process. Under the same frame of thought, it is worth acknowledging that the effectiveness of risk management approaches varies for diverse project risk profiles (Zwikael, & Ahn, 2011).

Under this area of study, it is crucial to note for example that, quick decision-making strategies can lessen uncertainties from postponements instigated by political, economic, or regulatory changes while the decisive delay of some commitments or decisions can lessen risks for projects with a great level of uncertainties (Dvir, Raz, & Shenhar, 2003). These point out the fact that risk management approaches are not one size fits all systems, instead, they need to be aligned to the risk profiles and the intended goals of the project and the complete portfolio of the project’s owner (Jahagirdar, 2015). Project directors need to have full knowledge of project risk management tools and the effectiveness of risk management approaches for them to develop wide-ranging risk management strategies before the approval of the project for design as discussed in this study.

Risks in Project Management

Risk in project management takes place when the project’s deliverables are hit with unforeseen measures that quite often than not put the project time limit at high risk (Montgomery, 2020). The project complications may not be the main factors to worry about, instead, how one handles such roadblocks define the success or the failure of the project. Project risks comprise both internal threats connected with the successful completion of each level of the project and external risks that are beyond project team control. The latter types of risks comprise of the external threats that emanate from the outside environment of the organization but impact the final value derived from the project. In both entire cases, the gravity of the risks rests on the nature and the degree of the probable end costs and their possibilities (Montgomery, 2020).

Types of Risks in Project Management

Various risks in project management are linked to the things most significant to each project; the risks discussed in this study could be interlinked to each other due to various unanticipated reasons that unfold along the process of implementation. Some of the types of risks in project management reviewed in this paper include; financial and cost risks (budget); risks related to time (scheduled risks); performance, quality, scope, and technological risks; environment and catastrophic risks; risks related to loss of support; among others.

Financial and cost risks

These are the most pressing risks in project planning management; the project may be demanding too much with too little resources at hand. Though, different projects have different financial risks that come about in different unexpected and unforeseen ways linked to monetary challenges which can put a project at a standstill (Thompson, 2019). If the project requires extra changes before fully being implemented, it means one needs more financial help in the budget to carry the project into conclusion than envisaged there before (McHale, 2019). When it comes to project planning, there is always a risk of running out of finances or poor allocation of the same due to numerous reasons that project managers ought to be in a position to foretell, reduce and find the way to the fore.

Costs risks refer to the risks brought about by more expenses incurred by the project than budgeted before due to poor cost approximating accuracy (Project-Management.com, 2020). Such risks may open more avenues for other risks such as performance risks; high invasion of cost risks in project planning leads to cutbacks of the scope of the project as well as its quality for the purposes of trying to stay within the range of the budget (National Research Council, 2005). Cost risks may additionally contribute to scheduled risk especially if the schedule is elongated due to lack of enough funds to accomplish the project in the deemed period of time.

Risks related to time and scheduled risks

Risks related to time and scheduled risks refer to the threats brought about by an extensive period taken by the project than expected and risks that make a project not to be accomplished within the scheduled time frame (Viswanathan, 2018). Every activity in the project’s life cycle embraces a particular amount of time which needs to be well understood; understanding such concept aids project managers to forecast how much time can be spent on each stage of the project from the start of the project to its end, and to pinpoint the barriers before they start planning the project’s implementation (Hulett, 2009).  However, enough time for changes should always be left open to avoid more risks during the project implementation process.

Risks related to time or scheduled risks may contribute to cost risks; projects that take longer time to be accomplished cost more money and may come up with more risks due to the time they take. Furthermore, they can also contribute to performance risks; late completion of projects affects its intended purpose to perform its anticipated objective fully in time (National Research Council, 2005).  Delays in the completion of a project lessen the value and quality of the project even if the increase of the project’s costs is not severe.

Performance, Quality, Scope, and Technological Risks

Performance risks refer to the unanticipated risks that come about when the project fails to produce consistent results as intended or when it fails to accomplish the main objective and mission of the requirements that engendered its justification in line with the specifications of the project (Spacey, 2019). Performance risks can result to cost and scheduled risks especially if technological challenges escalate the cost and the period of the project. Quality risks refer to the likely failures that come along when the project doesn’t realize its value fit for the purpose it was intended (Spacey, 2017). Quality gives a definition to the project’s value hence encompasses wide-ranging project features.

In project management, the project’s scope refers to the set of restrictions that describe the range of a project; it defines what is to be supplied to the clients as an outcome of the project resourcefulness. Adequate comprehension of the project’s cope therefore permits the project manager and its team to comprehend what falls outside and inside the borders of the project for better project planning (Stricker, 2019). Scope risks, therefore, refer to the changes brought about by various factors such as scope creep, integration concerns, software and hardware deficiencies, and changes in dependencies just to mention but a few (Viswanathan, 2018).

Technological risks on the other hand refer to the delays that come as a result of deficiencies experienced in the software and hardware or the default of an essential platform or entire infrastructure system (Viswanathan. 2018). For example, through the middle part of a project, the project team realizes they are using a cloud service provider that doesn’t meet their performance benchmarks; besides this, they could be concerns about the platform used to construct the software and its update that doesn’t support of its functions anymore (Mizoguchi, 2012). This poses great risks to the project’s implementation process; it prevents the normal occurrence of functions without any alarm and drastically reduces the desired effort for improving the unexpected system or infrastructure challenges.

Environment and catastrophic risks

These refer to the risks that the project may have a harmful consequence on the environment or that concealed threats may be exposed at the time of implementing the project. Project risks to the environment like incidences of pollution or risks from the environment like flooding may take place at any phase in the project life cycle (Zeng, Tam, & Tam, (2010). Grave incidents can have a dangerous effect on both cost and schedule risks.  Catastrophic risks, on the other hand, comprise unanticipated natural risks in the form of destruction of infrastructure for example that are exclusively main threats to the project cost, performance, or schedule (Bostrom, & Cirkovic, 2011).

 They have a low probability of occurrence but with severe impacts when they take place; examples of catastrophic risks are dependence on serious inventions that may or may not prove to operate during the project implementation process, the innovation of discarded products that aren’t estimated or not satisfactorily characterized, and reliance on one dealer or crucial project equipment.

Risk Management

Risks refer to uncertain or rather unforeseen imminent threats that have a negative effect on the intended project when they take place (Edwards, & Bowen, 2013). Every project has different risks; long term projects are more vulnerable to high risks vis-à-vis short term projects. The success or the failure of any project is always a direct result of risk management (Ray, 2017). A project can be well-thought-out as failed when no time limit, financial cost, value, and scope are realized.  Risk management, therefore, refers to a simple project management strategy that involves the identification and evaluation of potential risks that stem from diverse areas of the project’s life cycle for the purposes of preparing how best to evade or deal with such risks in advance (McHale, 2019). It is a crucial project management exercise that guarantees the occurrence of the least number of surprises when the project is underway. Furthermore, risk management is not just a reactive strategy, but it encompasses part of the planning process that figures out threats that may take place in the implementation project process and how best such threats can be mitigated suppose they take place (Ray, 2017).

While we cannot foretell the future with a foregone conclusion, we can put into place a modest and simplified risk management strategy to foretell the doubts in the projects and lessen the occurrence or effect of such doubts. This aids in the improvement of the probabilities of fruitful project accomplishment and mitigates the magnitudes of such risks (McHale, 2019). The process of risk management entails the development of the awareness of the risk, identification of risk as evaluated in this study, both quantitative and qualitative assessment of the risk, prioritization of the risk and its ownership, responding and monitoring of the risks, and active ongoing process of risk management (Ray, 2017).

The following ways refer to the means by which the financial and cost risks; risks related to time (scheduled risks); performance, quality, scope or technological risks, and environmental and catastrophic risks discussed above can be managed. Financial risks that are related to monetary challenges needed to carry the project to its conclusion can be managed through maintaining adequate emergency funds that offer a crucial backup alternative to handle the unexpected and unforeseen risks (Len Penzo dot Com, 2013). Keeping a little rainy day money helps in the management of project risks that come due to financial threats which can jeopardize the whole project implementation process. Furthermore, diversification of investments and having a second income source are very significant planning strategies to mitigate financial risks; it may not eradicate losses per se, but it may lessen financial risks through the alternatives they offer. 

Cost risks can be managed by analyzing the risks that may influence project costs irrespective of their low probability of occurrence and making estimation and determination of how to keep extra money for such risks (Jones, 2001).  Cost risk management calls for managers to comprehend and make use of the cost component of estimating costs which depends on the project’s scope baseline that provides what is to be estimated, any constrictions put forward on the project, and the main activities to be done in order to bring the project into conclusion (Kerzner, 2017).

Furthermore, it entails a project schedule which offers the quantities and the type of required resources to complete the project; a human resource plan which provides all project labor rates and other costs needed to make cost estimate (Jones, 2001). It also incorporates a risk register which is a significant part of approximating the funds required by the project, and the existing culture, systems, policies, and lessons learned of the organization which ensures faults in estimating are not repeated and that excellent strategies are put into place for more truthful estimations (Kerzner, 2017).

Risks related to time and scheduled risks can be managed by adding a safety margin to the estimated project process to make sure that the project implementation process is accomplished in time (Hulett, 2009). The addition of the safety margin is added as a contingency to safeguard the project from risks; the margin is normally increased till the project managers are certain of making a valid estimate. Time and scheduled risks can also be managed by including the estimated task work and the expected starting day and ending the day in the planning process and ensuring that the focus is geared towards the amount of effort put forward in realizing the project in the scheduled time and not on the due dates of the project (Filiatrault, & Peterson, 2000). Starting the project as soon as possible, multitasking, and managing all the key resources well is another way of managing time and scheduled risks. Performance risks can be managed by seeking necessary help from the senior management team on the project’s conduct needed to make sure the project is on the right track to realize its intended objectives and benefits. Furthermore, the risks can be managed by putting into place diagnostic systems, boundary systems, interactive systems, and belief systems geared towards the regulation and practical implementation of the project by the involved team (Yetton, & Liu, 2006).

 Quality risks can be managed by standardizing the organization’s project strategies and the language used around quality and risk undertakings; employing enterprise quality management software that aids in mitigating risks (Littlefield, 2012). In the same frame of thought, quality risks can be managed by sharing previous successes, failures, challenges, and trends not only with the management but also with the project team members, and dealers, and lastly evaluating quality risks and prioritizing the needed work that can help reduce them (Napoli, 2014). 

Scope risks can be managed by capturing well and outlining the project tasks that need to be accomplished; focusing on the scope creep and keeping a record of the changes, tracing,  affirming, and disapproving unnecessary changes and where possible conducting and audit of the project deliverables and evaluating the results of the original project plan (Clarizen, 2017). Furthermore, scope risks can be managed by paying attention to the restriction that describes the range of a project and well understanding of what falls within and without the project’s borderline and embracing a technological software and hardware without many deficiencies (Viswanathan, 2018). This can be well captured through a well-defined scope statement that is comprehensive, well-drawn to explain the project.

Technological risks can be managed through monitoring of data from time to time and end to end user; evaluating and scrutinizing technological systems, sensitive information, and the organization’s project information for vulnerabilities helps to mitigate technological risks (Lack, 2019). Furthermore, having a project continuity plan that incorporates the protocol for handling technological interruptions and reestablishing services that can reduce anticipated risks helps in the management of technological risks (Lack, 2019).

Lastly, environmental and catastrophic risks can be managed by evaluating environmental exposures of a project and other unforeseen threats such as how previous uses of the specific project area can contribute to the pollution exposures for the project team or contractor. They can also be managed through working with consultants that comprehend the best environmental hazards, health, and safety governing rules and how they apply to project management (Chisambara, 2010). Putting environmental concerns on the forefront helps to reduce significant risks that can confront projects; nevertheless, purchasing insurance against environmental and catastrophic risks that affect projects can be an alternative to mitigating their risks. For example, the project manager can buy contingent liability emanating from waste disposal. 

Risk Management approaches

Having reviewed and defined risk management as a process of pinpointing, evaluating, and taking steps to mitigate project risks to the desired level, the risk management approach on the other hand establishes strategies, tools, techniques, and the duties of the team and their roles for a particular project. The four main risk management approaches include; risk avoidance approach, risk reduction approach, risk-sharing approach, and risk retention approach (Verbano, & Venturini, 2011).

The risk avoidance approach refers to not engaging in any project activity that could result in any risk, especially during the project implementation process. This kind of risk management approach seems to be an answer to entire project risks, however, avoidance of risks on the other hand contributes to losing out on the possible gain that retention and acceptance of a threat may have permitted (McNaughton, DeYoung, & Corr, 2016). Not engaging in project management for the purposes of evading the risk results in the loss of the possible earning of the benefits that come with the implementation of the project. For example, increasing risk regulation in project management has contributed to the avoidance of handling higher risk projects which come with different benefits (McNaughton, DeYoung, & Corr, 2016).

The risk reduction approach entails decreasing the severity of the harm or the chances of the harm from taking place in the project implementation process (Collins, 2013). Risks can be both positive and negative; heightening risks, therefore, means finding a middle ground between risks that are negative and the advantage of project operation or project activity and between risk mitigation and the energy applied (Collins, 2013). Current software advanced approaches, for example,, lessens risk by supplying software incrementally.

Previous software approaches suffered on the basis that they solely managed to deliver software in the last phase of the project; any challenges faced in the initial stages of the project meant exacerbated cost risks and endangered the entire project. Current software projects therefore can reduce wasted efforts to a sole iteration (Collins, A. E. (2013). 

Risk-sharing refers to the sharing of risks with another party, loss or gain, and the ways to mitigate such risks (Fafchamps, & Gubert, 2007). It entails partnering with other organizations to share the involved risks and the activities that come with such risks. Most organizations that work on a global project for example reduce legal, political, and other risks linked with global projects through developing a joint venture with organizations or companies situated in the country where the project is taking place (Fafchamps, & Gubert, 2007). Outsourcing is an example of a risk-sharing approach; an organization can outsource software to facilitate its project from another organization (Collins, A. E. (2013). 

Risk retention on the other hand entails accommodating the loss or the advantage of gain from the threat (risk) when it takes place. It is a very viable approach for little threats where the cost of protecting the risk would be superior in a given period vis-à-vis complete sustained project losses (Zandi & deRitis, 2011).  Most or almost all risks that are unavoidable or not transferrable are mostly reserved by default; these incorporate catastrophic risks discussed previously and war for example (Zandi & deRitis, 2011).

Conclusion

This study has outlined financial and cost risks; risks related to time (scheduled risks); performance, quality, scope, and technological risks; environment and catastrophic risks; risks related to loss of support; among others as the major risks encountered in project management. It has gone further to define risk as uncertain or rather unforeseen imminent threats that have a negative effect on the intended project when they take place. In the same breath, it defines risk management as a simple project management strategy that involves the identification and evaluation of potential risks that stem from diverse areas of the project’s life cycle to prepare how best to evade or deal with such risks in advance.

 By extension, it has evaluated how to manage the outlined risks in the study before evaluating risks avoidance approach as a disengaged approach in any project activity that could result in any risk especially during the project implementation process, risk reduction approach as an approach that entails decreasing the severity of the harm or the chances of the harm from taking place in the project implementation process, risk sharing as an approach that entails sharing of risks with another party, loss or gain and the ways to mitigate such risks, and lastly risks retention as an approach that entails accommodating the loss or the advantage of gain from the threat (risk) when it takes place.

It is very important to note that project risk management must be given great attention to the diverse stages of its acquisition. The improvement of technical developments or risks brought about by the discussed factors may jeopardize the whole process of project implementation and subsequent assessments that can facilitate the realization of the same project. More similar project management strategies are needed after the beginning phase of the project, and key attention has to be given to all areas that breed different risks without assuming any of them.

However, since risks prove to be the main threats to project management, a kin consideration has to be given full attention by the project managers. One way to do this is through risk communication from time to time; the challenge sometimes may be based on such risk communication is made to the intended audience and how to make it comprehensible in line with other risks. This is because rise communication is more or less linked to crisis communication; the difference between the two has to be considered and the project team has to be sensitized to understand that even though risks pose a great threat to project management, they aren’t the end of it per se.

Risk management has of late become a very significant topic for most financial organizations, particularly since the commercial sector of financial services is linked to situations of insecurity. It is specifically significant in project management platform, as its discipline entails numerous functions based on the organizations and their connected risks. Projects normally comprise of high phases of uncertainty gotten from their compressed agendas, insufficient or indeterminate budgets, and designs that are mostly near the possible boundary of achievable performance.

The favored means for measuring performance in risk management is therefore the use of lead indicators that are connected with procedures that maintain the accomplishment of desired results.