Importance of Risk Analysis: Stakeholder Roles & Responsibilities

This report examines the importance of risk analysis in project management, highlighting the interrelationship between scope, schedule, and budgetary risks. It details the roles and responsibilities of various stakeholders, including project managers, clients, engineers, and employees. A risk register is presented to identify potential risks and outline mitigation plans. The report emphasizes that effective risk management, including proper planning and stakeholder engagement, is crucial for project success and customer satisfaction. Desklib offers a platform for students to access similar solved assignments and past papers for further study.

Running head: IMPORTANCE OF RISK ANALYSIS
IMPORTANCE OF RISK ANALYSIS
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1IMPORTANCE OF RISK ANALYSIS
Table of Contents
Introduction:....................................................................................................................................2
Importance of Risk Analysis in a project:.......................................................................................2
Interrelationship between scope, schedule and budgetary risk identification:............................3
Stakeholders and roles:................................................................................................................5
Risk register:................................................................................................................................7
Matrix:.........................................................................................................................................9
Conclusion:......................................................................................................................................9
Reference:......................................................................................................................................11

2IMPORTANCE OF RISK ANALYSIS
Introduction:
A probability of occurrence of any event which can have a positive or negative impact on
the project is known as risk. For the betterment of the company it is essential. The failures in
projects develops advanced ideas of solving them. Thus analysing the risks is important for an
organisation. This report discusses about the importance of the risk analysis in an organisation
along with the Stakeholders roles and responsibilities on the project (Stulz, 2015).
Importance of Risk Analysis in a project:
The organisations worldwide undergoes many projects in order to implement new
systems in the organisation or expansion of the business or improvement in technology and many
more. There are certain things that has to be kept into consideration in order to deliver the work
on time and avoid any undesirable circumstances in the process of the project. Among these
consideration, “risk factor” is one of the very important thing to discuss as it not only results in
undesirable outcomes from the project undertaken but also delays other process of the projects.
Thus analysing the risk becomes one of the major step in the project management planning. Risk
Management plans are usually undertaken so that the risks can be identified and the mitigation
techniques can be determined (Crawford, 2014). There are various steps in the risk management
planning which have to be followed in series in order to get rid of the risk factors in the project.
The chances of the success increases if proper risk management is implemented in the
project. According to the PMBOK, some of the benefits of the risk analysis and management in
the organisation is given below (Rose, 2013):
 Larger disasters can be avoided with the help of the risk analysis.
 Expenses are saved and thus the revenue is increased.

3IMPORTANCE OF RISK ANALYSIS
 Ultimate satisfaction can be reached as we are not unknown to the upcoming risks.
 Completion of the project can be done successfully with the help of the risk analysis.
 A proper competitive environment can be reached with the help of the analysis as the
better is the risk analysis in the system the greater is the outcome of the project than the
competitors.
 Accountability and the responsibilities can be understood better and increases gradually.
 Better and recent opportunities are explored with the help of the proper risk analysis.
The risk management plans are often represented in the tabular form in order to make it
easier for the manager or the in charge to see and point out the area of improvements to
mitigate them (Burke, 2013).
Interrelationship between scope, schedule and budgetary risk identification:
The project scope is that part of the project planning that determines and documents the
goal of the project along with the necessary deliverables, functionality deadlines costs and the
task of the projects. The scopes are generally determined by the project manager. In simpler
words the project scope is the list of things that are required for the completion of the project
undertaken by an organisation (Gao, Sung & Zhang, 2013).
The objective of the project is determined form the project scope hence it is very
important for the stake holders to understand the project scope properly. The dependencies,
limitations and the assumptions are clarified form the project scope developed by the project
manager (Shamanna, 2013).
The listing of the activities that has to be performed in the project is termed as project
scheduling. Certain mile stones are set up by the project manager while scheduling the project.

4IMPORTANCE OF RISK ANALYSIS
These milestones are meant for the employees to follow. For the completion of a certain task a
deadline is scheduled so that it is followed by the employees and the next process can be
initiated. This is a systematic way towards the completion of the project (Pritchard, 2014).
When the estimated budget for a particular project does not completes the requirements
of the project it is termed as budget risk. The project schedule, the scope of the project are
interrelated as the failure to identify the proper budget is the failure of determining the scope,
similarly the deadlines set during the scheduling of the project is also a failure as the expense for
the individual process is not sufficient as per the planning (Fadun, 2013). Hence, improper
decision made by the project manager to determine the scope of the project which includes the
proper budgeting of the project results in disruption of the schedule pre planned for the
completion on time. There are certain consequences of failure of the project planning and budget
estimation, they are:
 Increment of the budget allotted for the project
 The increment in the timeline decided for the project
 The effort for planning increases as it has to be done again
 Planning network activities increases due to implementation of the new plans and
programs (Manuj, Esper, & Stank, 2014).
 More design cycles for smaller processes
 The reviews have to be repeated and project report has to be recreated by the project
manager for every individual process.
 Delay in completion of the project
 Engineering efforts multiplies.

5IMPORTANCE OF RISK ANALYSIS
 The management of quality and effort regarding that increases as well (Ashley-Smith,
2013).
 Probabilistic risk management and mitigation techniques increases the attention and
effort of the management.
Stakeholders and roles:
Sl.
No.
Stake
Holders
Roles and responsibilities
1 Project
manager
The role of the project manager is the greatest in the planning of the
project. The project manager is responsible for everything that is
happening at the site of the project. Starting from the planning of the
project, determining the risk in the project to the scheduling of the project
is the responsibility of the manager (Shamir, 2014). The cost estimation
and development of the budget depends upon the project manager.
Customer satisfaction and monitoring the whole progress is also prepared
by the project manager. Basically a project is totally dependent upon the
project manager with the presence of the stake holders.
2 Client The client is the person for whom the project is being prepares. The total
investment is done by the client. It is the client for whom the project
manager has to prepare everything for.
3 Engineers The engineers are responsible for the designing of the project.
4 Bank The loans sanctioned for the project are offered and controlled by the
bank.
5 Employees The main stake holder of a project is its employee. Without whom the
completion of the project is impossible.
6 Labors In the construction projects, labors plays a vital role. They assists the
project managers, the engineers and the clients by completing the project
within the deadline.
7 Suppliers The raw materials are supplied by the suppliers may it be technical or non-
technical. The requirement of the raw materials are mandatory.
8 Security The security personnel or technology used is also a stake holder as it is
responsible for the maintenance of the security in the organisation so that
the work can be done without hindrance (Haito-Chavez et al., 2014).

6IMPORTANCE OF RISK ANALYSIS
These are some of the stake holders of a project. The stakeholders varies with the type of
project undertaken. For example, a construction project may have carpenters and electricians as
the stakeholders as well. Stake holders are the ones who are directly or indirectly involved in the
project (Liu, He & Baras, 2015).

7IMPORTANCE OF RISK ANALYSIS
Risk register:
The risk register is created such that the risks in an organisation can be analysed and then
mitigation techniques can be implemented. According to the PMBOK and the PMI standards,
some of the common risk in planning is project are listed below (Hermano & Martín-Cruz,
2019):
Sl.
No.
Risk description Impact Likely Person
responsible
Mitigation
Plan
Rating
1 Poor budgeting:
budget analysis in the
project is very
important. The
budget may fall short
of the requirements.
Resulting in delayed
project (Li, 2014).
High Medium Project
Manager
Scopes should
be considered
properly
judging all the
possible places
where the
prices may
vary with time.
4
2 Insurance problems:
The insurance
policies may fail or
become inactive.
High High Banks or
Insurance
Company
The terms and
conditions
must be read
properly before
applying. Back
up must be
prepared.
3
3 Security issues: This
occurs in the
technical projects
mainly where the
security breaches
occurs due to the
unethical practices of
the hackers.
High High Information
technology
department
Implementation
of the security
protocols.
5
4 Human error: the
errors occurring due
to the human are
inevitable. Poorly
trained employee can
result in the human
error (Covello, &
Merkhoher, 2013).
High Medium Stakeholders Proper training
of the
employees,
proper
estimation of
every
requirement in
the project
3
5 Internal conflict: the Medium High Stakeholders Regular 3

8IMPORTANCE OF RISK ANALYSIS
risk of the internal
conflict occurs due to
the difference in
opinion in the
organisation. This
delays the work
progress and hampers
the reputation of the
company.
meeting and up
gradation of the
work status. If
conflict arises,
proper settle
met should be
achieved with
the help of
discussion.
6 Technical
malfunctioning
results in system
failure in the
organisation causing
loss or destruction
(Sanchez-Bayo & Goka,
2014).
High High Information
and
technology
department
Maintenance of
the machines
and checking
upon them
regularly
prevents the
malfunctioning
from occurring.
Moreover, back
up machines
must be kept in
case of
emergency.
5
7 Unavailability of the
raw materials causes
delays in the progress
of the work. The
failure in
achievement of
target, and customer
dissatisfactions
occurs due to this.
High Low Supplier The stock up
gradation on
the regular
basis keeps
track of the
materials left
and the
requirements
for the next
task.
2

9IMPORTANCE OF RISK ANALYSIS
Matrix:
Likely
High 5 2,3,6
Medium 1,4
Low 7
Low Medium High
Impact
Analysing the risks mentioned in the register it can be seen that all of them needs
immediate attention. There are more risks that can be identified in a project which are not
mentioned over here (Rausand, 2013). Almost all the risks identified in the project has to be
mitigated in order to deliver the project on time and within the estimated budget of the client.
Customer satisfaction can only be achieved when the agency or the company undertaking the
project succeeds in doing so on time. The company reputation depends upon the act of the
project manager as he or she in this case plays the key role of assessing the risk of the project and
finding process and ways of mitigating them.
Conclusion:
Identifying the risk with the help of proper planning and management of the project not
only helps in reducing the chances of the risk in the organisation but also helps in mitigating

10IMPORTANCE OF RISK ANALYSIS
them whenever and wherever discovered. Identifying the scopes of a project is important as it
helps in estimation of the proper budget of the project and schedule the process accordingly.
Hence from the report it can be concluded that Project management planning reduces the chances
of failure of a project undertaken by the organisation and the project manager plays a significant
role in development and execution of the project.

11IMPORTANCE OF RISK ANALYSIS
Reference:
Ashley-Smith, J. (2013). Risk assessment for object conservation. Routledge.
Burke, R. (2013). Project management: planning and control techniques. New Jersey, USA, 26.
Covello, V. T., & Merkhoher, M. W. (2013). Risk assessment methods: approaches for
assessing health and environmental risks. Springer Science & Business Media.
Crawford, J. K. (2014). Project management maturity model. Auerbach Publications.
Fadun, O. S. (2013). Risk management and risk management failure: Lessons for business
enterprises. International Journal of Academic Research in Business and Social
Sciences, 3(2), 225.
Gao, S. S., Sung, M. C., & Zhang, J. (2013). Risk management capability building in SMEs: A
social capital perspective. International Small Business Journal, 31(6), 677-700.
Haito-Chavez, Y., Law, J. K., Kratt, T., Arezzo, A., Verra, M., Morino, M., ... & Ryan, M. B.
(2014). International multicenter experience with an over-the-scope clipping
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Li, W. (2014). Risk assessment of power systems: models, methods, and applications. John
Wiley & Sons.

12IMPORTANCE OF RISK ANALYSIS
Liu, X., He, H., & Baras, J. S. (2015, June). Trust-aware optimal crowdsourcing with budget
constraint. In 2015 IEEE International Conference on Communications (ICC)
(pp. 1176-1181). IEEE.
Manuj, I., Esper, T. L., & Stank, T. P. (2014). Supply chain risk management approaches under
different conditions of risk. Journal of Business Logistics, 35(3), 241-258.
Pritchard, C. L., & PMP, P. R. (2014). Risk management: concepts and guidance. Auerbach
Publications.
Rausand, M. (2013). Risk assessment: theory, methods, and applications (Vol. 115). John Wiley
& Sons.
Rose, K. H. (2013). A Guide to the Project Management Body of Knowledge (PMBOK® Guide)
—Fifth Edition. Project management journal, 44(3), e1-e1.
Sanchez-Bayo, F., & Goka, K. (2014). Pesticide residues and bees–a risk assessment. PloS one,
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