Project Risk Management in IT: Case Studies and Impact Analysis

This discussion board post examines the critical importance of risk management in the context of IT projects. The analysis begins by defining risk management and its significance in ensuring project efficiency and success. It highlights the common risks, such as schedule and cost overruns, that plague IT projects, supported by statistics and case studies, including examples from McKinsey & Company research and failures like Levi Strauss and Hong Kong airport. The post emphasizes that inadequate risk assessment often leads to financial losses and project failures. The document underscores the benefits of proactive risk management, including avoiding disasters, reducing expenses, and gaining competitive advantages. The conclusion summarizes the discussion and reiterates the necessity of robust risk management strategies for IT projects, referencing the provided articles and additional research to support the arguments. Word count: 723

Running head: PROJECT RISK MANAGEMENT
Project Risk Management
Name of the Student
Name of the University
Author Note

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Table of Contents
Introduction:...............................................................................................................................2
Importance of the Risk Management:........................................................................................2
Conclusion:................................................................................................................................4
References:.................................................................................................................................5

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Introduction:
Risk management is the process of the prioritization, evaluation and identification of
the risks which has an effect on the earnings and the total capital of the organization. These
threats can occur due to various type sources which include the management errors, disasters,
legal liabilities and financial uncertainty.
Risk management is very much important to complete a project with the utmost
efficiency. In this document, the importance of the risk management in the field of the IT
projects will be evaluated. Also, some examples will be shared which will show the negative
impact of the risk.
Importance of the Risk Management:
Risk management is done by the risk managers to identify the risks related to the
projects (Cardona, 2013). The risk managers are well aware of the risks related to a project
and also they are well equipped with mitigation techniques of those identified risks. As per
my opinion risk management techniques increases the success rate of the project. I believe
the risk management is important for the project because it provides various benefits to the
project. The benefits are the:
 It helps to avoid critical disasters.
 Mental satisfaction is provided by assessing the risk and their mitigation techniques.
 It helps to save the expenses. Thus it increases the total revenue of the project
(Carvalho & Rabechini Junior, 2015).
 Identifying the risks early can help the organization by providing competitive
advantage (Reason, 2016).

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To understand how important the risk management is for the IT projects the
McKinsey&Company and the University of the Oxford has collaborated among themselves
and conducted research in the field of the IT projects. From the research, I have understood
that the main risk related with the IT software projects is the schedule and the cost overruns.
For this case, they have taken the total number of 5400 IT projects. From the research, it has
been determined that half of the IT projects exceeded the initial cost of the project with the
overwhelming price tag of $15 million (Bloch, Blumberg & Laartz, 2012). This IT project
runs 45% over the estimated budget, 7% over the estimated time for the completion of the
project and with that that this project provides 56% less value to the organization which was
projected initially. This figures clearly stating the organization is facing a problem and
financial loss for this reason. Total calculation of the overrun cost of these IT projects was
$66 billion (Bloch, Blumberg & Laartz, 2012). This is a huge amount of money which is
overspent by the IT organization. From the above case study, I believe the IT organizations
have overrun the budget of their projects because the risks related to their projects were not
evaluated properly. For this reason, I think the evaluation of the risks assessed with a project
needs to be evaluated successfully to mitigate this type of budget issues of the IT
organizations.
In another case study, the authors Flyvbjerg and Budzier has discussed the
multinational company, Levi Strauss. The company was founded in the 19th century, but the
IT network system is very much older compared with the current generation. For this reason,
the organization upgrading their IT systems. The proposed budget for the up gradation was
$5 million. Very soon the project of the $5 million becomes the reason for the $200 million
loss to the company (Flyvbjerg & Budzier, 2011). From the case study, I have assessed that
the main reason behind the loss of the organization was the inability of fulfilling the orders.
As per my findings, the organization failed to fulfil orders because the risks with that IT

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project was not assessed properly (Burke, 2013). Also, the IT related problems in the Hong
Kong airport costs approximate of $600 million loss in the business (Flyvbjerg & Budzier,
2011). This problem occurred due to the glitch in the information display system and in the
cargo shipment database. Form the assessment I have found that the average project cost
overrun is 27% and all was due to not properly assessing the project related risks. The Levi
Strauss faced the loss because of the poor leadership quality which is a kind of risks that
negatively impacted the project.
Conclusion:
From the above discussion, it can be concluded that most of the IT projects failed or not
provided any vital importance to the organization due to not properly assessing the risks
related to the project. Thus the risk management is required when managing any type of IT
projects. In this document what are the risk management technique and the necessity of the
risk management technique in the field of IT projects have been defined. In this document
some examples of risks is defined which has negative impacts on the IT projects. Also, the
case study of the various IT projects and the results of those IT projects have been defined in
this paper.

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References:
Bloch, M., Blumberg, S., & Laartz, J. (2012). Delivering large-scale IT projects on time, on
budget, and on value. Retrieved from https://www.mckinsey.com/business-
functions/digital-mckinsey/our-insights/delivering-large-scale-it-projects-on-time-on-
budget-and-on-value
Burke, R. (2013). Project management: planning and control techniques. New Jersey, USA.
Cardona, O. D. (2013). The need for rethinking the concepts of vulnerability and risk from a
holistic perspective: a necessary review and criticism for effective risk management.
In Mapping vulnerability (pp. 56-70). Routledge.
Carvalho, M. M. D., & Rabechini Junior, R. (2015). Impact of risk management on project
performance: the importance of soft skills. International Journal of Production
Research, 53(2), 321-340.
Flyvbjerg, B., & Budzier, A. (2011). Why Your IT Project May Be Riskier Than You Think.
Retrieved from https://hbr.org/2011/09/why-your-it-project-may-be-riskier-than-you-
think
Reason, J. (2016). Managing the risks of organizational accidents. Routledge.