A risk is any unforeseen event that has the potential of derailing plans and projects. If the risk takes place, it is likely to have a positive or negative impact on the project or a venture being undertaken by a company or an individual. The chance of the risk-taking place or happening is called a probability. Usually, the probability is less than 100 percent. If the risk has high chance of taking place, then it is rated as having a probability of 100 percent. A probability of one hundred percent means that the risky event will take place. An event can only qualify as a risk if it has a probability above zero percent. The event also needs to display a likelihood of it happening or not, or what is referred to as a probability. If it does not have any of these traits, then the event is not a risk (Project Perfect, 2010).
It is important to gauge whether the risk has a positive or negative impact on the project. The negative impact is what the risk manager tries to reduce to mitigate losses. The negative impacts can cause insurmountable losses to the project and may even ruin the progress of the project. Sometimes, the risk manager does not bother to prevent the risk; rather, they concentrate on neutralizing the negative effects. This is especially so for risks which are inevitable. It may be more expensive to avoid the risk than having a plan to handle its impacts (Project Perfect, 2010).
A risk management plan has four stages. The first stage involves the identification of the risks. This is done through brainstorming together with the analysis of risks identified in other past projects in the field. The next stage is risk quantification. There is a need to analyze the potential impacts that the risky event has together with its likelihood of taking place. The next stage is risk response. There are various strategies that are adopted in risk response. These include avoiding the risk, transferring the risk to someone else, mitigating the risk or trying to reduce its impacts on the project and reducing the chances of the risk occurring. The final step is risk control. This also helps to get rid of risks that have passed while identifying new ones (Project Perfect, 2010).
Risk Management Plan for the Development of Project X
This document details a risk management plan for the development of project X. As the project was being analyzed, there were several risks were identified. Preamble planning for a project helps to prevent future problems while the project is underway. The planning helps in monitoring of the project. Small and avoidable problems are dealt with before they metamorphose into insurmountable obstacles as the project progresses. The risks are monitored and dealt with immediately once they are identified. The ideas expressed in this plan are meant to be a shield against the potential risks before they take a toll on the project development.
The risk plan was developed from a session of brainstorming conducted with all the stakeholders in the project. In this case, they were officials from the Department of Defense (the client), consultant engineers, and other interested groups. Given the nature of the security needs for the product or project, there were a lot of discrepancies in risk identification. But the stakeholders eventually came up with several risks. The list of potential risks identified was very long, but the organization of the same into different categories made it possible for some of them to be combined as they fell under the same category. The merging of the risks made it possible to whittle them down to fifteen. As such, this plan will analyze fifteen risks (Bookerr, 2009).
Some risks acquired greater significance than others. This is for example the possibility of a change in specifications of the AMDS. This was possible as there were ongoing discussions on how some settings and programming of the systems were supposed to be. This meant that the software and hardware were likely to face changes. This was a risk and it was well prepared for by the team. This is because every model that is to be made would be tested and the succeeding demonstration equipment will integrate the changes (Bookerr, 2009).
There was also a risk of security breach and having the AMD’s turn into a hazard. The sophistication of the product was a clear indication that if anything went wrong, it would lead to a great disaster. The contingency plan was to ensure that the system was able to notice faults in the application and communicate the same to the operator. This will enable close monitoring of the system, while security checks will be carried out regularly to ensure that the AMD was in the form (Melainer, 2010).
Another apparent risk emanated from the resources allocated to the project, together with the timeframe for completion of the same. The project is an expensive undertaking in terms of time and other resources involved. It is thus important to have plans that will ensure that the project is carried out within the identified schedule. The risk emanating from this is likely to occur during the testing stages. For example, there is likelihood that the product may not meet the set threshold during the initial tests, calling for several others. However, in the project, there is an in-built allowance of time for this lag. But another risk is that the time allocated for these tests may run out, and the operators will be forced to utilize time allocated for other activities (Bookerr, 2009).
Unrealistic cost and time estimation in the planning stages of the project is a possibility due to the complex nature of the activity. This is especially so when compiling the project “Work Breakdown Structure”. These estimates are interlinked with almost every other risk in the project. This is given that any unforeseen changes in the work plan will lead to changes in cost and time scale. Early identification of these inconsistencies and risks helps to ensure that the project is guarded against possibilities of failure in its preparation stages (Melainer, 2010).
Efforts were made to obtain relevant information by searching for similar projects and making comparisons between them. The major objective for this was borrowing of techniques needed to satisfactorily complete the current project x. For example, past projects will help the risk managers identify the right combination of time and financial resources, and also the major pitfalls to look out for. However, the search for comparative literature was not very successful. There was little that the managers could unearth. But the few comparisons made helped in coming up with a structure that will be used. Continuous, routine and timely updates of resource projections should be embraced throughout the lifespan of the project in order to help mitigate and prevent problems (Melainer, 2010).
Although it is difficult to forecast which requirements could be altered as the project continues, it is important to note that resources devoted to extensive project planning will be beneficial to all parties in the long run. Along with research and regular update on similar projects to gain a perspective on past requirement changes, a broader knowledge on successful conversion details will help to anticipate them. This knowledge must be regularly and successfully communicated to all project stakeholders. Active participation by organizations and various stakeholders in the project will give the Department of Defense a competent system within the envisaged timeframe, a system that can effectively monitor security. The AMD is a unique project, and hence there are unique challenges which, if not clearly identified and dealt with, are likely to bring down the whole project (Bookerr, 2009).
In summary, project risks are inevitable and are part of a risk manager’s life. However, there are many techniques that can be used to mitigate the potential impacts of these risks and keep the project on track. For Project X, the risk manager has compiled a list of fourteen significant risks. They are categorized using the Risk Probability / Impact Matrix. From this categorization, two risks stood out as the most important to plan for and monitor. Budget and time overruns are potential risks given the complex and unique nature of this project. But the impacts of these risks can be mitigated through extensive pre-planning analysis of the project by the risk manager. This is together with provision of regular updates on resource allocation and continuous comparison with similar projects. Project requirements’ changes are inevitable, though their negative impacts on the project can be mitigated through research, acquisition of knowledge, and most important, communication between the contractor, other stakeholders and the client-the Department of Defense (Melainer, 2010).
The Risks
Potential risks in projectX
Quality Risks
- The demonstration might not match the quality required by the Department of Defense
- The technology might be too sophisticated for the Department of Defense
External Risks - The enemy might access information on the technology and use a more sophisticated system to bypass it
- There might be natural disasters that may incapacitate the technology, for example earth quakes
- Change of specifications by the Department of Defense to fit particular needs after demonstration
Internal Risks - The failure in hardware and software leading to a disaster
- The military personnel carrying out the maintenance might fail to operate the machine correctly leading to accidents
Budget Risks - The funds allocated to complete project may not be enough as it may cost more
- The150 additional orders for AMDS by the Department of Defense may not be completed within the given time frame
- Poor cost estimates that may lead to overrun of the budget
Schedule Risks - Project may overrun the time period of five years
- The time period may be too short for completion of the whole project
Resource Risks - The technology may be too complex for the staff assembled
- There might be a conflict of ideas between the selected scientists and project team Members. This may be a problem hindering the success of the project
References
Bookerr, S. (2009). A project manager’s book of forms: A companion to the PMBOK Guide. Canada: John Wiley and Sons.
Melainer, N. O. (2010). Risk impact/probability chart.
Project Perfect. (2010). Project risk management.