EPM5740 Project Risk Management: A Comprehensive Report

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EPM5740 Project Risk Management
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Executive Summary
Their port aims to explain the basic overview of the project risk management which is focusing
on the effective functioning of project management which is directing towards the risk
management approaches that are used to encounter different projects. The methods described
here are applicable for different projects and the primary aim of this is to provide a basic
understanding of the topic. Further, it explains the different responsibilities of managers for the
development of risk consciousness by providing proper education about the implementation of
effective risk management techniques. At last this report focuses on different approaches to
optimize the project results.
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Table of Contents
Executive Summary.......................................................................................................................................2
Introduction....................................................................................................................................................4
Extensive literature review on risk and risk attitude......................................................................................5
Discuss how does risk attitude influence risk culture or vice versa..............................................................7
Tools to influence risk...................................................................................................................................7
The need to build a good risk culture with your project team.......................................................................9
Discussion on what does risk culture look like............................................................................................11
Conclusion...................................................................................................................................................13
Reference.....................................................................................................................................................14
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Introduction
Project risk management is a very important facet for the effective functioning of project
management. According to PMBOK, it is an important aspect which is necessary for smooth
functioning. It is explained as one of the uneven events which may involve but should have both
the positive as well as negative effects. From a mathematical point of view, it is declared as “the
product of probability and the impact”. So for maintaining the effectiveness in the project, risk
management, the roles & objectives and technical analysis should be clear which will increase
the performance. The project risk management consists of the following branch which leads to
the optimum performance of the team. It includes the “management of planning risk”, “risk
identification and monetary identification”, “performing qualitative risk analysis”, "effective
communication with fund dealers", "Improving the risk-based research for the improvement of
the quality" and "monitoring and controlling department".
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Extensive literature review on risk and risk attitude
The interconnection between the risk culture, risk attitude and organisational behaviours are
attracting the attention of many researchers form a long time. Risk culture& risk attitude are the
elements of project risk management which are playing an important role in project planning and
development.
A lot of studies on project risk management and risk culture prove that it has a deep effect on the
overall performance of the project (Bakker & Somani, 2006). These concepts are involving all
the important aspect for the successful management of the project development. Unfortunately,
the scope of these studies is not much broad and is only done in the developed countries but the
impact is too much effective wherever it is practically implemented. With the faith and the
simplicity of this model, Financial Stability Board (FSB) has examined this relationship in the
developing country Ghana. It consists of value, belief, knowledge, attitude and many other
factors which are used for the development. IRM has developed the risk culture framework to
influence its performance as well as effectiveness. It consists of the hierarchy structure which is
implementing the risk factor in the well organised as well as controlled manner. It includes the
“personal disposition to risk”, which is further controlled via the "personal ethics". Further, the
“behaviour” and the “organisation culture" are supporting the risk controlling within the
organisation that leads to the development of risk culture. In this, all the things are controlled in
the well defined and maintained manner so that it doesn’t create any negative impact on the
project in which the risk is involved. Some of the practical examples of risk culture are risk
tolerance, risk awareness, balancing, participation, accounting, authority, etc.
Risk attitude is a type of behaviour where an individual takes the change on the less certain
events that may bring either a positive or negative impact on the project management
performance. The manager’s own risk attitude declares the course of action that is needed to be
followed. Sometimes, the one who is the extreme risk seekers are blind enough form the
deterioration of the performance and it will degrade the performance. So before taking any kind
of risk, there is the need to investigate and analyse the results which create both positive as well
as the negative impact on the project development and its performance. These are the hidden
feature which allows the people to respond quickly within the small interval of time but if the
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results are even sub-optimal, then also there should be a negative result in the overall
performance. It is the choice for the individual or the group to take the risk. The approaches in
this risk attitude are including awareness as well as emotional literacy. Therefore there is a
requirement of dealing with the risk involved in the project manner in a controlled manner so
that the result obtained should be optimum.
The five points Likert scale is one of the important tools which are controlling both the risk
culture as well as risk attitude (Bakker & Somani, 2006). With this effect further the Risk culture
framework (RFC) was developed which is working for the controlling and monitoring of these
tools.
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Discuss how does risk attitude influence risk culture or vice versa.
The term attitude is used commonly for the purpose of mental view or disposition to a fact. It
refers to the perception that people often use to perceive the stimuli at their workplace. It refers
to the state of mind, point of view or disposition fact. Another fact related to the attitude is
positioning a structure or an object that axes relation to the orientation.
Tools to influence risk culture
Integrated risk management can be achieved through well-defined or framed coordination
approach (Richardson & Fenech, 2012). It identifies the management of pertinent business,
assets and people's risk. In order to transform the risk culture of the organization, the successful
determination of the integrated risk framework is an essential process that needs to be
implemented. A unique perception of project risk management outlines critical interactions of
talent, asset and ideas that drive business performance with various methods like:
HR interventions: the alignment of HR and risk management policies are more likely to design
or administrate high-quality processes. It includes revamping, suggestions and administration
through development and performance management.
Risk management: Independent suggestions over policies and procedures and documentation to
influence an organization's risk culture.
Governance and compliances: The monitoring of organizational structure to ensure the finest
results in terms of effective decision making, reporting & scheduling, accountability, best market
practice, etc.
Attitude is a significant component of risk culture. There are three components of risk culture is
attitude, behavior and consequence (Richardson & Fenech, 2012). In order to improve or
influence risk culture, risk attitude is gradually implemented by the risk management thinkers
and managers by top-down and bottoms-up perspective approach. The measurement of risk
culture by risk culture management is very important in meeting the requirements of corporate
governance code. The aspects of culture may not much obvious in immediate identification,
measurement or understanding using two influencing key assessment as follows:
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Individual risk profile: The management of risk by applying proven psychometric assessment
in the group of employees can assist the managerial hierarchies to understand the risk profile.
The identification of risk profile is very cooperative influencing the risk culture of an
organization.
Employee risk survey: A survey of employees can be a collective method to analyze employee's
perception or behaviour. A survey measurement allows the different key aspects of risk culture
like an assessment of findings, into the context of external norms, to identify the drivers of
employee risk attitude, outline potentiality of risk (Paquin, et.al., 2016). The influencing process
of risk culture includes various questions also such as:
 Do employees feel safe in speaking upon risk culture of an organization?
 How do the employees perceive the example set by the managers and leaders?
 How do employees feel responsible for the respective risk management in the
organization? Do they really feel their responsibilities in a positive way toward
influencing risk culture?
 How does the performance management or bonus matrix influence the employees to
change behaviour towards influencing risk?
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The need to build a good risk culture with your project team.
The term risk culture can be defined as a progressive method to undertake the uncertainty of risk
and future tangible losses (Cleden, 2017). It depends on the circumstance that could impact one
or more objects in a positive or negative way. Risk attitude can be defined as a state of mind or
art of disposing of the situation with real-time facts that could conquer the uncertain situations or
critical circumstances.
There are several requirements for building risk culture in the work environment or project team
such as:
 The monitoring of risk attitude of people in the organization and recording of reactions to
change that is suitable for the situations
 Identify the area where forward-looking towards the objective of the team project
 Setting up a benchmark to find external resources
 Set a pedestal line to make the easier the performance review
The number of possible risk attitude can be adopted by the organization in order to get the results
on the basis of behaviour, attitude and consequence. Behaviour is the biggest factor that
underlines or directly indicates the inner attitude to perceive the objects. In order to manage the
effect of the human factor in the organization, managers ensure the appropriate use of
behavioural psychology and management. The need for implementing good risk culture with the
team project as follows:
Setting up work tone from the top
The establishment of the tone of risk culture is required to set at the beginning. As the leadership
makes risk culture as prosper or prior action. Similarly, the organization filters all aspects of risk
management. The organization acquires diagnostics in order to maintain or reinforce the cost-
efficient strategy (Deloitte, 2018). Companies also use the survey strategies to get assist in the
identification of rewarding behaviors in the organization.
Engaging external stakeholders
The engagement programs to attract and bring external stakeholders in order to comprehensive
empirical evidence that can demonstrate the obligations of risk management. The risk
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management includes several policies and regulatory requirement that are strictly forced to
follow, though demonstration compliances take place with necessary principles of risk-based
guidelines.
Better informed business decision
The decision making and delivery of knowledge & information processes are also enhanced by
the risk culture (Hillson, 2013). The diagnostic tool used by the manager's help them to
understand the risk culture of their own functional area. This function enables the employees to
speak the truth with safety or without any fear. This diagnostic tool helps to measure the
development of over time understanding of staff that can entrance the value of expenditure in
training & development.
There are other key business drivers of project management which involve risk attitude that
influences risk culture of an organization. The organization have establishes various progress
reports in developing an effective framework, policies, procedures, rules and standards.
However, there are some of the rules which do not apply timely or not understand properly. The
variance of understanding between balance risk and reward decision making is the called risk
culture. The measurement of risk culture includes an investment of money which is constituted
by risk management of the organization by investing a significant amount of money (Hillson,
2013).
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Discussion on what does risk culture look like.
In earlier time the risk control strategies or culture of many organizations administrates their own
culture that trade loss for trade portfolio. The events or actions that are responsible for the
organization’s losses and failure are the biggest reason for insufficient recognition by the
inventors of the risks they were engaged. Insufficient threats that are outside the control of the
business include challenges like judgment by risk control, weak risk governance and deficient
security.
Although this data was an estimated record or exceptional case that has reviewed by the
expertise of an organization to measure the performance of their own (Deloitte, 2018). So the
organization could establish a good risk culture that looks like high-quality approach:
1. A distinct tendency and consistent tone from the top that includes the board of directors
and managerial hierarchies that identifies or monitors the demographic report of risk
culture. The determination of analyzing the risk that, which risk is advantageous or
profitable for the organization and which risk is negative.
2. A holistic approach is required to follow that ensures effective governance and control of
risk management over other parameters like HR programs, incentives & bonuses and
other non-monetary benefits.
3. Consideration of wider stakeholder positions in decision making is an integral part that
needs consideration by higher authorities and other managerial hierarchies. They are
responsible for practising contingent approach.
4. The consideration of the common acceptance of goals in the organization during meeting
up the challenges of risk management is an obvious accounting and ownership of specific
risk.
5. Timely reporting of flowing and admitting the flow of risk helps to maintain transparency
and also remove the bad attempts of acquiring risk for the organizations.
6. In order to reduce the uncertainty of risk in the organization, there are several acts and
legal laws followed by the organization such as zero exploitation of resources and
whistleblower act. These activities are proven effective in the identification of failure,
near misses and mistakes.
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7. No process or operation is too large to administrate, the strategic implementation is
totally responsible for the effective execution of the business plan. Risk management also
acquires strategic implementation that controls risk management and directs its activities
in an optimum manner.
8. Appropriate utilization of contingent approaches and risk-taking behaviour is always
rewarded or encouraged by the management because the contingent decisions are much
riskier than the normal plans. The contingency plans are supremely risky than the other
one.
9. The risk management skills and knowledge includes different approaches which are
necessary to hold by the managers such as resourcing of risk management process,
encouragement and development programs for employees, widespread membership and
support to other professional bodies (Xia, et.al., 2018).
10. An adequate amount of diversification of different perception of employees indicates
factors like cultures, values, behaviours and morale that signify necessary ethical
principles.
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