ERP Project Risk Assessment: A Case Study of Three Companies

This report provides a comprehensive analysis of ERP project risks, focusing on three small to medium-sized enterprises (SMEs) in the manufacturing sector. It begins with an introduction to ERP systems and their associated failure rates, emphasizing the importance of risk management. The report utilizes a risk matrix to assess the probability and impact of various risks across three case studies (Companies A, B, and C), each at a different stage of ERP implementation. The risk registers for each company are presented, detailing specific risks, their probability, impact scores, and proposed treatments (avoidance, mitigation, transfer). The conclusion highlights common and unique risks across the cases, emphasizing the need for tailored risk management strategies based on organizational context, including factors like organization type, employees involved, organization environment, and supplier network. The report concludes with a discussion of the importance of proactive risk management for successful ERP implementations and provides references to relevant literature.

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ERP Risk
Risk Matrix and Risk Register
2/28/2019

ERP Risk
Table of Contents
Introduction...........................................................................................................................................2
Risk Matrix............................................................................................................................................2
Case A...................................................................................................................................................2
Case B...................................................................................................................................................3
Case C...................................................................................................................................................4
Conclusion.............................................................................................................................................5
References.............................................................................................................................................7
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ERP Risk
Introduction
Enterprise Resource Planning (ERP) is the integrated management of the core business
processes and automates the business functions at the back-end. There are a large number of
ERP projects that usually fail. The success rate for the ERP projects is just 30%. There are
several small and medium scale enterprises (SMEs) that desire to implement the ERP
packages in their organizations. However, there are various risks that emerge during the
process. It is necessary for these organizations to have advanced risk management plans and
processes in place so that the ERP installations and implementations are successful (Salmeron
& Lopez, 2010).
Risk Matrix
The risk matrix for the ERP cases is depicted in the table below.
Impact 1 2 3 4 5
Probability
1
Low Low Low Moderate Moderate
2 Low Low Low Moderate High
3 Low Low Moderate High High
4 Moderate Moderate Moderate High Critical
5 Moderate Moderate High Critical Critical
Case A
Company A is small scale firm that develops blast cleaning technology and deals in the
manufacturing of automated blast cleaning machines and robots. There are currently 20
employees that are associated with the organization. The company is contemplating on the
implementation of an ERP package as there are issues in the current excel-based ICT systems
in the organization (Saatcioglu, 2009). The risk register for the company is depicted in the
table below.
Risk
ID
Name Probability Impact Score Treatment
1 Communications
gaps between buyer
3 4 12 Avoidance
2

ERP Risk
and customer
2 Inflexible system –
Difficult to make
changes
3 4 12 Avoidance
3 Special needs of the
organization not
included
2 5 10 Avoidance
and
Mitigation
4 Absence of full-time
Project Manager
4 5 20 Avoidance
5 Data migration
issues
4 4 16 Mitigation
6 System connectivity
issues
4 4 16 Mitigation
7 Supplier issues –
commitment and
involvement
3 5 15 Transfer
8 Not enough value by
the system
3 4 12 Avoidance
and
Mitigation
9 Post-production
maintenance issues
2 5 10 Transfer
Case B
The second company, Company B deals in sheet metal work, welding, and heavy metal work.
The organization also specialises in steel, paper, chemistry, and ship manufacturing related
tools and equipment. The organization was incepted in the year 1974 and there are currently
140 employees associated with the organization. The company is currently selecting the ERP
packages to implement in the organization. It has already had discussions and sessions with
numerous ERP suppliers so that it may choose the most suitable out of all (Mamoghli, 2011).
The existing ICT systems that are installed in the company are in the last phase and it has
become essential for the organization to install the ERP packages. The risk register for the
organization is included in the table below.
Risk Name Probability Impact Score Treatment
3

ERP Risk
ID
1 Poor compromise –
for all the parties
involved
3 4 12 Avoidance
2 Inadequate
management and
communication
2 5 10 Avoidance
3 Poor selection of the
ERP system
2 5 10 Avoidance
4 Issues in ERP
system due to
existing business
processes
4 5 20 Avoidance
5 Disruption of
business continuity
4 4 16 Avoidance &
Mitigation
6 Schedule overrun 4 4 16 Mitigation
7 Configuration &
testing issues
4 4 16 Avoidance
8 Poor data entry 4 4 16 Avoidance
and
Mitigation
9 Non-disciplined
usage
3 4 12 Avoidance
10 Partial benefit
realization
3 4 12 Avoidance
Case C
The third company, Company C had implemented a part of the ERP system in the past.
However, with the expansion of the business operations and activities, there will be new
functionalities that are now required to be added to the ERP package. There are various risks
that are associated with this activity as the failure of a single operation may impact the entire
organization (Pan, Nunes & Peng, 2011). The risk register for the organization is depicted in
the table below.
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ERP Risk
Risk
ID
Name Probability Impact Score Treatment
1 Issues in ERP
system due to
existing business
processes
5 5 25 Avoidance
2 Cost Overrun 5 5 25 Avoidance
3 Supplier
commitment issues
5 5 25 Transfer
4 Configuration &
testing issues
5 5 25 Avoidance
5 Neglect and
deteriorated
preference by the
supplier
5 5 25 Transfer
6 Inability to
understand customer
needs by the supplier
5 5 25 Transfer
7 Poor data entry 3 5 15 Avoidance
8 Partial benefit
realization
3 4 12 Avoidance
and
Mitigation
9 System does not help
the business
3 4 12 Avoidance
and
Mitigation
Conclusion
The risk registers for the three companies is included in the sections above. All the three
companies are in the different stages of their ERP implementation process. As a result, the
type and nature of the risks involved is different for the three companies. Also, there are some
risks that are common; however, due to the difference in the ERP phase, the probability and
impact scores vary. Also, there are other factors that are involved in the determination of
these scores, such as organization type, employees involved, organization environment,
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ERP Risk
supplier network, and many more. Risk management is a process that allows these
organizations to have the knowledge of the probable risks in advance. The strategies to deal
with these risks can be prepared so that the implementation of the ERP packages is
successful.
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ERP Risk
References
Mamoghli, S. (2011). An analysis of the “project†misalignment risk in ERP projects.
IFAC Proceedings Volume, 44(1), 13092-13097. doi:
https://doi.org/10.3182/20110828-6-IT-1002.01899
Pan, K., Nunes, M., & Peng, G. (2011). Risks affecting ERP postâ€implementation: Insights
from a large Chinese manufacturing group. Journal Of Manufacturing Technology
Management, 22(1), 107-130. doi: https://doi.org/10.1108/17410381111099833
Saatcioglu, O. (2009). What determines user satisfaction in ERP projects: benefits, barriers or
risks?. Journal Of Enterprise Information Management, 22(6), 690-708. doi:
https://doi.org/10.1108/17410390910999585
Salmeron, J., & Lopez, C. (2010). A multicriteria approach for risks assessment in ERP
maintenance. Journal Of Systems And Software, 83(10), 1941-1953. doi:
https://doi.org/10.1016/j.jss.2010.05.073
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