PROJECT AND RISK MANAGEMENT

How can project and risk management contribute to the improvement of Operations strategy of an organisation?



How can project and risk management contribute to the improvement of Operations strategy of an organisation?

Introduction

The discipline of project risk management has developed over the recent decades as an important part of project management. Several researchers, see, e.g. Miles and Wilson (1998) and Mullins et al. (1999), argue risk as being an exposure or a probability of occurrence of a loss. Further, Miles and Wilson (1998) define risk as a barrier to success and Hertz and Thomas (1994) argue that risk is related to concepts of chance such as the probability of loss or the probability of ruin. Risk can also be viewed as having a positive effect. Jaafari (2001) defines risk as exposure to loss/gain, or the probability of occurrence of loss/gain multiplied by its respective magnitude.

The PMBOK (2004) defines risk as an uncertain event or condition that, if it occurs, has a positive or negative effect on a project's objectives. When put into context, it seems that risk can have a two-dimensional meaning, namely a negative as well as a positive implication. The author considers risk a negative wording, proposing to separate the contradictory meanings of risk, and thereby allowing opportunity to be considered the positive wording of a positive implication. Project management is now a well-established approach for affecting a wide range of changes, see, e.g. PMBOK (2004), Pellegrini (1997), and Turner (1993). How well one can plan, execute, and control the tasks and how well one can manage the relationships with all the stakeholders involved in the project constitutes the success or failure of the carrying out of a project (Sandhu, 2004).

Project risk management is a natural part of project management. Regarding project risk, there are different risks when viewing different perspectives of different stakeholders. In today's highly complex project environment, there is clearly a need for better understanding of how projects are related to each other and what the implications may be of their interrelations. Different process steps may have multiple interactions that are difficult to understand. This is interaction complexity which refers to the fact that the different process steps cannot be separated without affecting overall process performance (Sandhu, 2004). This widespread use of projects, in some cases becoming the preferred or dominant business process, and their use in realizing strategic or complex change have also resulted in the need to marshal project-based activity in some coherent, beneficial way (Pellegrini, 1997). PMBOK (2004) defines a project as a temporary endeavor undertaken to create a unique product, service, or result.

Lycett et al. (2004) and Pellegrini (1997) describe portfolio risk management as focusing more on strategic issues for a portfolio of projects and the ability to achieve strategic objectives. Clearly there is a need for a shift in focus for risk management in a portfolio environment. Hillson (2004) and Ward and Chapman (2003) also highlight the importance of including the management of opportunities ...