Question

The Scenario: A construction company has been awarded the contract to build a pipeline in Alaska. The project timeline is of the highest priority because work can only be completed during summer months due to adverse weather conditions. One of the suppliers of a key component has longer lead time than is required to complete the pipeline, but may be able to deliver if the construction company will pay fees to expedite. There are other suppliers, but these suppliers are not on the construction company’s approved suppler list and it would take time to get them approved. There is a huge penalty in the contract if the project is not completed on time.

• Define the risk management process.
• Explain the role of risk management in the project planning process.
• Describe at least two risks and their sources for the selected scenario.  
• Outline how risk management may mitigate the risks for each risk listed.
• Explain how you would document the risk

Answer 1

RISK MANAGEMENT PROCESS:

• FIRSTLY, THE RISK IS TO BE IDENTIFIED.
• SECONDLY, ANALYSE THE TYPE OF THE RISK WHETHER IT IS OF FINANCIAL NATURE OR PHYSICAL NATURE.
• THEN, EVALUATE/RANK THE RISK AS MORE OR LESS, SMALL OR LARGE ETC.
• AFTER EVALUATION, TREAT THE RISK TO ELIMINATE IT FROM THE PROJECT OR ATLEAST TO LESSEN ITS EFFECTS.
• LASTLY, KEEP ON MONITORING THE RISK TO REVIEW WHETHER IT HAS BEEN TREATED CORRECTLY OR NOT. IF NOT, BEGIN THE PROCESS AGAIN.

RISK MANAGEMENT PLAYS A VITAL ROLE IN PROJECT MANAGEMENT BECAUSE, IN PROJECT MANAGEMENT, MANY THINGS NEED TO BE DEFINED LIKE COST, TIME, PEOPLE ETC. ALL OF THESE INCLUDE RISKS. SO RISK MANAGEMENT WILL HELP TO DEFINE THE RISK, CONTROL THE RISK AND MONITOR THE RISK SO THAT IT IS EITHER ELIMINATED OR CAUSES LESS LOSS.

THE TWO RISKS IN THE SCENARIO ARE:

1. THERE IS ONLY ONE SUPPLIER AND ITS LEAD TIME IS LONGER THAN REQUIRED. ALSO, HE CHARGES MORE MONEY. SO THERE IS A RISK THAT THE PROJECT COMPLETION MIGHT BE AFFECTED.
2. PENALTY THAT THE FIRM MAY HAVE TO BEAR IF THE PROJECT IS NOT COMPLETED ON TIME.

RISK MANAGEMENT CAN MITIGATE THE ABOVE RISKS IF THE SUPPLIER IS EITHER CHANGED WHO CAN DELIVER THE SUPPLIES ON TIME WITH LESS LEAD TIME OR TO DEAL WITH THE EXISTING SUPPLIER TO DELIVER ON TIME. THIS WILL REDUCE THE LEAD TIME AND THE PROJECT WILL AUTOMATICALLY BE COMPLETED ON TIME. THIS BRINGS US TO THE SECOND RISK OF PENALTY. IF PROJECT IS COMPLETED ON TIME, FIRM WILL NOT HAVE TO BEAR ANY PENALTY. SO THE RISK WILL BE ELIMINATED.

TO DOCUMENT RISK, A RISK REGISTER WILL BE MAINTAINED IN WHICH THE RISKS WILL BE WRITTEN WITH THEIR CORRECTIVE ACTIONS. THIS WILL BE MONITORED FROM TIME TO TIME TO SEE WHETHER THE ACTIONS ARE ON THE RIGHT PATH OR NOT.