Project Management Dissertation

Dissertation on Project Management

Risk Management: Definition and Processes

When an individual or a group of people is working on a project, it is crucial to think through all the possible obstacles, which may occur in the process and the ways they can be eliminated. According to Turbit (2005), a risk differs from an issue in a probability of an event to occur. An issue has a 100 percent of a probability to happen, while a risk has less than 100 percent (however, more than zero percent). Therefore, the ways, in which both of them are managed, also differ.

A risk is also defined by the consequences that it has on a project as a whole. If a project completion has serious discrepancies from an initial plan, the events, which have caused these discrepancies, are considered to be risky. Even if those events do change the process of a project’s completion; however, do not harm it, they are not considered to be of a risk.

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Risk management is a tool, which assists in predicting the risks, which might occur during the process of the project’s completion and cause harm. Risk management allows to save money, avoid the delays in the completion and to increase the quality of the project. According to Turbit (2005), generally, there are four stages, which each team has to go through when working on a project, in order to prevent all the possible risks and threats.

The stages are:

• Risk identification
• Risk quantification
• Risk response
• Risk monitoring and control

The first step, which has to be taken, is identifying what are the possible risks that a project might be facing in the process of its completion. It is the best to involve all the people, who participate in the process, in order to review the steps, which need to be performed. Every department must examine the possible difficulties, which might occur in their specific tasks and to report them to the management team.

Usually, there are two types of risks: business and generic. Business risks include, for example, financial risks. Those are “[…] ongoing risks that are best handled by the business” (Turbit, 2005). Generic risks are the risks, which occur due to inability of a team to complete certain tasks or to complete them on time.

While identifying the risks, a team must examine the causes of a certain risk and its impact on the project. Project managers must think of how to try to both eliminate the initial threats as well as the results of the certain events. By doing so, a team will be better prepared for meeting any kinds of risks at any point of the project’s completion.

After all the risks are identified, it is necessary to evaluate them in order to know, how dangerous they can be for the project and what is the probability of them to happen. The potential events are rated in two dimensions: a probability of a risk and its impact on the overall performance. Depending on the rates of each dimension, a risk can be: low, medium, high, and critical. (Turbit, 2005)

A third step is a response to the risk. Generally, there are four things that a project management team can do about the risk.

These steps are:

• Avoiding the risk
• Transferring the risk
• Mitigating the risk
• Accepting the risk.

By avoiding the risk, a team can take certain steps in order to eliminate it. For example, it can use other materials, suppliers, partners, etc. Transferring risk means making someone else to be responsible for a certain risk. Mitigating the risks is making their impact on the project less harmful and effective. This means that a team could make some extra agreements (e.g. with suppliers) for securing the process of completing a project. Finally, a risk can be also accepted by a team in case it is considered to be not serious and harmful for the project.

Finally, the last stage of a risk management is a risk control. While three previous steps need to be done once for a single project, controlling the risk must be a continuous process. Changes can occur throughout the entire completion process, and, consequently, so can risks. In addition, new risks can always occur on different stages of a project’s completion.

Case Study: Royal Bank of Canada

An appropriate example for a risk management could be a case of a Royal Bank of Canada, which happened in 2004. A company was faced with a serious breakdown in its operational system, when it was trying to carry out a project of upgrading a new software program. This case illustrates both strong and weak sides of the bank’s management (especially risk management) and the way it has handled the occurred threat.

In 1995 Royal Bank of Canada (RBC) became one of the first banks to install software for its online banking operations. In 2004 software needed to be upgraded. The next day after an upgrade a failure in the system was noticed, and the entire business went out of control for almost a week. As bank has reported to the public later, the failure was caused by an incorrect data, which was entered during the upgrade by one of the workers. However, there was another reason to the occurred event. A code, which was required for a system to be upgraded the day before a breakdown, was not tested properly before the usage.

Considering the four stages of the risk management, it becomes clear that a company has made several obvious and very serious mistakes before and, as will be mentioned below, after the event. Upgrading online banking software in such institution as Royal Bank of Canada is an extremely important and complex project. A bank has millions of clients, who use its services every day. After a breakdown people could not reach their accounts for almost a week.

The first serious mistake made by RBC was the date, on which an upgrade took place. The upgrade took place on May 31, in the end of the month, when every bank is usually faced with the largest amount of transactions. According to the first stage of a risk management process, when RBC was planning on having an upgrade, its first issue was supposed to be a choice of a right time. Taking into consideration the fact that any upgrading process can go out of control, bank’s management team was supposed to plan a project to the middle of the month, when the amount of transactions is much lower. A failure in the system is the risk, which has both a high probability and a high impact not only on the completion of the project, but also on the overall performance of the bank. Therefore, management had to pay the most attention to it.

Another mistake of RBC was upgrading the system both on the main and backup systems at once. Backup facility was the only way to recover from a breakdown; however, since the upgrade was applied to both systems, both of them got broken. Therefore, all the files from a backup system became unavailable and could not be used as a system’s recovery. RBC had to make an upgrade separately in order to ensure that there will be at least one program, which would contain the entire bank’s information.

There were also mistakes made by the bank after the breakdown has occurred. Apart from the IT professionals’ inability to fix the problem immediately, there was no single person responsible for communicating the problem to the public. Bank’s CEO has left the country during the time, when RBC was facing serious problems and needed an authority to solve its problems. The breakdown in RBC was not only unidentified in advance as a risk, but it also was not evaluated correctly when it appeared. For several days bank was reporting to its client that a problem would be fixed the next day, instead, it took RBC a week to handle it.  

Despite of the bank’s failure to go through the first two stages of the risk management, it has handled the last two successfully. The response to a risk was as quick as possible, considering the breakage of a backup system. In addition, RBC has issued a formal apology to its customers and has given a detailed explanation of the occurred problem. In order to control any future risks and threats, RBC has made IBM Corporation its consultant in all the existing and future technical issues. Finally, a bank has offered refunds to the customers, who have seriously suffered from the incident.

Even though Royal Bank of Canada did not take all the necessary steps in order to prevent the possible risks and threats, it has responded to a risk in a good and professional way. In case a risk management would be handled correctly even before the incident, it would be significantly easier to repair the system after the breakdown (if any would appear).

Total Quality Management 

Total Quality Management is concentrated on providing a long-lasting success for an organization through creating customers’ satisfaction (ASQ.org). According to this method, every employee in an organization participates in this process. There are certain steps in this method, which give organization guidelines, which assist in boosting success for an entire company.

According to PHCC Educational Foundation (1996), there are twelve steps, through which an organization has to go in order to improve its performance.

These steps are:

• Obtain CEO commitment
• Educate upper-level management
• Create steering committee
• Outline the vision statement, mission statement, & guiding principles
• Prepare a flow diagram of company processes
• Focus on the owner/customer (external) & surveys
• Consider employee as an internal owner/customer
• Provide a quality training program
• Establish quality improvement team
• Implement process improvements
• Use the tools of TQM
• Know the benefits of TQM

There are, however, difficulties in using Total Quality Management. One of the biggest issues is changing the philosophy of the company, making customer a priority. According to its methods, the success of an organization is improved by concentrating on the customers and improving the conditions for them (both internally and externally). Since every employee in an organization plays an important role in the whole process, another issue is making them willing to go through these changes by explaining the importance of the new implementations. Separate departments need to be gathered together to work toward the same goal.  

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