Risk and Risk Management Process
Risk and Risk Management Process
Introduction
This essay aims to study the current risk management process on multi-projects and project portfolios undertaken in an enterprise, aiming to identify areas of desire to extend studies and improve existing guides. The paper utilizes recent publications on multi-project and project portfolios. The study indicates that the project risk management process is a more studied topic than program and portfolio risk management processes, in which precisely documented approaches are extremely challenging to find. The evaluation also indicates the necessity to incorporate improved tools to execute a consistent monitoring and management procedure. Incorporating a risk strategy is significant in analyzing the multi-projects or portfolio features that interact amongst outcomes and the susceptibility to risks.
1(a). Literature Review
The management of portfolio risk involves taking on the appropriate level of risk in the hope of achieving an equivalent or more significant return. Management of risks and potential threats that may affect a project are the primary concerns of project and program risk management, which focuses on locating, assessing, and mitigating those risks and potential threats (Bushuyev and Verenych, 2018). In an institution dominated by projects, there is no place for the failure of projects. Fears and risks about a program or project are typically unique to that program or project. However, portfolios concentrate on the totality of the projects and programs, taking into consideration the economic return of the portfolio, how well it aligns with the overall organizational objectives and priorities, and how well it strikes a balance between the projects and programs it contains.
Given the inherent irregularities of projects, Sedlmayer (2018) argues that portfolio risk management is more challenging than project and program risk management. There is no specific formula that applies to an entire portfolio. What works for one part might not even work for the other. There’s a rising demand to incorporate a strategic point of view into project risk management approaches to account for an organization’s holistic viewpoints. Willumsen et al., 2019 state that a project cannot exist in isolation; it must be addressed within an organization that connects it to programs, project portfolios, and strategic objectives.
Research by Mortlock et al. (2021) argues that applying risk management in project management requires analyzing the interplay between the goal of the projects and the project variables. These factors, such as cost resources and other elements, exhibit dynamic characteristics and fluctuating uncertainties. As a result, the accomplishment of the goal, which is strongly dependent on these factors, is likewise questionable. Delay in deciding, the decision’s complexity, and a loss of control during the experimental stages are additional elements that contribute to project uncertainty and influence its variation. It’s good to note that the unpredictability of a project in a stable situation is greater at the beginning and decreases as the project develops due to planning and the appropriate making.
Nevertheless, uncertainties do not always diminish. The management of risks can take the dynamic nature of projects into account. In particular, it should consider not just the bad but also the reasonable implications of an incident.
A study on the application of risk management in programs by Trzeciak et al. (2021) states that a program comprises projects that are operated in unison to achieve a collection of substantial advantages. According to a second definition by Horváth (2019), a program is a temporary organization comprised of a group of projects handled collectively to meet strategic objectives that arent met by single project management. There is a significant connection between the attainment of strategic goals, multi-project benefits, and the program portfolios. Program management has a crucial role in implementing an organization’s strategy since all of the program’s projects adhere to a similar strategic vision. It has close ties to the strategic plan leadership and organizational development areas, as program management isn’t concerned with the delivery of the product but benefits from managing multiple projects.
According to Jafarzadeh et al. (2018), a significant contrast exists between a project and a program. A program is a framework that gives a strategic vision to multiple projects to achieve strategic and organizational development. However, a project is there to fulfill specified change objectives. There is a tendency for programs to have a hierarchical system and a sequential life span, similar to a project, notwithstanding this distinction. It is also considered that project management tools and procedures are applicable to program management. The initial version of successful management of programs recommended the application of a risk log on a project. When projects and programs are somehow similar, all possible benefits are lost.
Research on risk management methodologies for project portfolios Butler (2022) states that a project portfolio comprises projects, programs, and other kinds of work to administer efficiently. The significant difference between a program and a project portfolio is that a project portfolio has a life span. A project portfolio is a collection of processes to achieve various main objectives. A misunderstanding exists between project portfolio and program definitions due to their different roles in connecting strategy to specific projects (Ghasemi et al., 2018). Nevertheless, this circumstance has begun to evolve. Risk management techniques in project portfolio management analyze the likelihood of a project’s successes and failures and the risks introduced by choice of a project group throughout portfolio balancing. Nevertheless, it is hard to locate the guide of risk management for handling opportunities and threats from portfolio activities like project selection, project synchronization, and project prioritization in the literature.
A figure of portfolio risk management.
1(b) Recommendations
In risk identification and evaluation, vulnerability is not taken into consideration by risk management systems. This is a crucial point to note. The impression of the risk throughout the risk identification or evaluation process influences the vulnerabilities of the project, program, or portfolio. For example, if the project is strong enough to resist the impacts of a threat, then the risk will no longer create any negative consequences. It’s essential to incorporate a vulnerability analysis for the system, as this will give credence to the risk evaluation and assessment procedures, just as in other areas. An intriguing and potentially helpful enhancement to investigate would be the possibility of conducting an additional study to incorporate this idea into the theory behind project risk management.
The soft systems and complexity science techniques should incorporate the methodologies currently used for risk management. Due to the relevance of interdependencies in completing projects, programs, and portfolios, it is necessary to continue conducting research in this regard. It is standard management practice to consider the interdependence of resources. Still, other types of interdependence, such as knowledge, technology, or strategic planning, are frequently overlooked or undervalued. The number of interdependencies and the degree to which they change over time are two factors that determine the complexity level. Methodologies for managing project risk must consider all of these factors since the interactions between them are a primary cause of uncertainty.
When managing the risks of a project, it is necessary to consider potential opportunities carefully. Consequently, project risk management majors almost exclusively on the unfavorable consequences. In the past, conventional approaches to project risk management did not always consider the risks posed to the project. The gear is to discover and analyze other technological, operational, and financial risks. Only within the past several years has project risk management begun to consider strategic problems. It is essential to have a method for risk management that continuously verifies the variables of the project and re-evaluates the project’s scope while adjusting the predetermined plans in response to the ever-shifting environmental factors. There is a significant challenge from a strategic point of view since programs and portfolios are the carriers via which strategic requirements are communicated to projects and operational activities.
Nevertheless, a risk management plan designed mainly for program or project portfolios would bring excellent support. Standards or general techniques can be applied to various levels; regardless, a risk assessment approach was primarily designed for program and project portfolios. Tools for specialized monitoring and analysis would provide clarity and improved outcomes,
Conclusion
Because of their interdependence, multi-projects and project portfolios are not individually affected by the effects of occurrences; instead, they are impacted as a whole. Nevertheless, a general strategy is not a solution to controlling risks, and leaders who want to get the benefits feasible must build separate risk management manuals. Despite the comprehensive written material, there is a clear divide between the approaches to risk management used at the project level and those used in the organization. Tracking risk management manuals explicitly designed for program or project portfolios can be challenging.
TOPIC 2: RESOURCE CONSTRAINTS
Introduction
Management and organizations must contend with intense competitiveness for limited resources, opportunities, and dynamic consumer needs. Consequently, projects are updated and canceled due to economic activities and fluctuating market dynamics. Similarly, the increase in required tasks needs more resources than the organization can provide, thus necessitating a continuous evaluation and adjustment of project priorities. There’s a requirement for the ongoing and effective project management due to the quickening pace of wide-ranging and unanticipated technology and environmental changes and the need to reduce marketing time amidst the rise in global competition. The paper will discuss the resource constraints in multi-project management, the challenges of multiple projects, and failures on various projects and portfolio projects.
2(a) Literature review
At this point, the idea that the project portfolio comprises all ongoing projects is acceptable. However, Kock et al. (2022) argue that a portfolio does not consist of a collection of individual efforts; instead, it is a collection of projects that require a significant investment of time and resources. It is reasonable to assume that these projects selection with a view toward the future. In general, projects are not independent. Sedlmayer (2018) asks why companies go through the trouble of approving and supporting each project proposal before determining whether or not it contributes value to the company’s strategic objectives and whether or not it aligns with those objectives? A sensible individual would not purchase a diverse portfolio before an in-depth analysis of their long-term financial goals. It is because management cannot explain the strategic goals and objectives of the company or because management tends to give in to pressure from other managers who are politically astute and managerially adept.
A figure on the differences between multi-project management and project management portfolio
Recently, there has been a lot of publication on project resource allocation, frequently under the management of project portfolios. Various research focuses on temporary resource allocation strategies. In particular, Burkova et al. (2019) models prioritize daily scheduling, granting projects priority depending on the project financier’s urgency level, risk level, difficulty, or performance. Consequently, Lock et al. (2018) argue that projects with low-risk strategic significance are typically considered unnecessary and assigned a less priority, unlike those with less strategic importance though having a greater risk.
A trend to assign number one priority to all projects in the company portfolio exists. Despite this widely acknowledged significance, a clear project selection and prioritizing procedure is frequently absent; all chosen projects are of high priority. Hence, a clear direction in regards to projects is more urgent with vital needs for the resources, thus ensuring all projects are in a situation of equal competition for few resources Chan et al., (2019). A study by OKADA (2021) found that many organizations find it difficult to manage many projects due to disregarding the fundamentals of project priorities and standards. In a setting with various projects, the absence of preferences, classifications, norms, and similar tool applications hampers the start-up and launch of initiatives.
According to Danesh et al. (2018), it is necessary to undertake periodic assessments of present and future projects likely to appear in the project portfolio and resource allocation decisions. Without quarterly reviews, project portfolio decisions are late, while the settlement of resource allocation decisions is through talks involving project and resource managers. Without a proper procedure, resource allocations happen to the incorrect projects.
The multiple-projects setting has a distinct and entire life span with starting and ending dates, which often puts different projects in the project portfolio into distinct stages for the managers to plan and implement. Due to the many life cycle stages followed concurrently, it may be challenging for a project manager to strike a balance between the projects (Bond et al., 2018). Projects with varying priorities exacerbate the problem. Initial and future resource allocations prioritization favors a project with greater importance. Bringing or removing a project from the project portfolio exacerbates the situation.
2(a) Recommendations
Strategically doing business and planning should also incorporate the long-term allocation of resources. The distribution of medium-term resources is often done periodically, directly linked to the procedure above. Within the context of project implementation and delivery processes, daily planning is necessary to manage resources across many projects efficiently.
It is necessary to allocate resources medium-term to link daily planning to the organization’s strategic plan. By connecting moderate resource allocation and daily resource planning to future resource allocation, the stakeholders may have a greater understanding of the urge for a logically coherent project choice and priorities resulting in efficient resource allocation practices. The process integrates medium-term resource allocation with the long-term distribution of resources and the company’s strategic objectives. The organization achieves this by integrating long-term resource allocation, daily resource planning, and moderate allocation of resources, including day-to-day resource allocation with the company’s strategic goals.
A continuous state of flux characterizes most environments that entail multiple projects, and managers ought to be aware that a clearly defined procedure for project prioritization and selection can provide guidelines to project managers for planning and assigning resources. Resource allocation is all about choosing the most suitable alternatives among resources available during the project’s lifetime in the project portfolio and creating the appropriate priorities. Specifically, this topic major on the following: When one of the projects in the portfolio has a greater need than the others, there is virtually always competition for resources between the other projects in the portfolio.
It is vital to have a system for selecting and prioritizing the multi-project portfolio to make the components fit together correctly. This approach needs to include a comprehensive assessment procedure to analyze the intricate relationships between the projects that make up the strategic portfolio and the significance or risk posed by the portfolio as a whole, which is constantly shifting. The process should continue until the realization of a suitable conclusion. The steps for improving performance to increase the organization’s competitive advantage, or factors that will boost the success of specific projects, need development. It’s essential to reorganize ongoing projects into a new portfolio.
Project managers need to optimize those resources when operating with limited resources. A project manager can develop innovative solutions to alleviate the effects of resource limits by first ensuring that their projects and teams are effectively allocating their available resources. Taking this step may involve, for instance, determining which projects will take precedence over others or determining which team members will be assigned to each of the several projects.
Conclusion
Understanding what project portfolio management entails is probably the most effective method for summing up the primary focus of this type of management and the key differences between it and managing many projects simultaneously. Senior managers ensure that assessment methodologies are made available to people who contribute project ideas for progress and that their use is known to these individuals. Many organizations find it difficult to manage many projects due to disregarding the fundamentals of project priorities and standards. In a setting with various projects, the absence of preferences, classifications, norms, and similar tool applications hampers the start-up and launch of initiatives. It is necessary to undertake periodic assessments of present and future projects likely to appear in the project portfolio and resource allocation decisions.
References
Bond-Barnard, T.J., Fletcher, L. and Steyn, H., 2018. Linking trust and collaboration in project teams to project management success. International Journal of Managing Projects in Business.
Burkova, I., Titarenko, B., Hasnaoui, A. and Titarenko, R., 2019. Resource allocation problem in project management. In E3S Web of Conferences (Vol. 97, p. 01003). EDP Sciences.
Bushuyev, S., & Verenych, O. 2018. Organizational maturity and project: Program and portfolio success. Developing Organizational Maturity for Effective Project Management (pp. 104-127). IGI Global.
Butler, M.J., 2022. Project portfolio management practices-a theoretical base and practitioner guidelines. International Journal of Project Organisation and Management, 14(1), pp.65-88.
Chan, F.T., Wang, Z., Singh, Y., Wang, X.P., Ruan, J.H. and Tiwari, M.K., 2019. Activity scheduling and resource allocation with uncertainties and learning in activities. Industrial Management & Data Systems.
Danesh, D., Ryan, M.J. and Abbasi, A., 2018. Multi-criteria decision-making methods for project portfolio management: a literature review. International Journal of Management and Decision Making, 17(1), pp.75-94.
Ghasemi, F., Sari, M.H.M., Yousefi, V., Falsafi, R. and Tamošaitienė, J., 2018. Project portfolio risks identification and analysis, considering project risk interactions and using Bayesian networks—sustainability, 10(5), p.1609.
, V., 2019. Project management competence–definitions, models, standards, and practical implications. Vezetéstudomány-Budapest Management Review, 50(11), pp.2-17.
Jafarzadeh, H., Akbari, P. and Abedin, B., 2018. A methodology for project portfolio selection under criteria prioritization, uncertainty, and project interdependency–a combination of fuzzy QFD and DEA. Expert Systems with Applications, 110, pp.237-249.
Kock, A., Schulz, B., Kopmann, J. and Gemünden, H.G., 2020. Project portfolio management information systems’ positive influence on performance–the importance of process maturity. International journal of project management, 38(4), pp.229-241.
Lock, D. and Wagner, R. eds., 2018. The handbook of project portfolio management. Routledge.
Mortlock, R.F., Jones, R.D., Stewart, C.W., Deitrich, A.T. and Reid, J.M., 2022. Program Management versus Portfolio Management in Defense Acquisition. Acquisition Research Program.
OKADA, I., 2021, November. Dynamic Modeling of Resource Allocation for Project Management in Multi-Project Environment. Transdisciplinary Engineering for Resilience: Responding to System Disruptions: Proceedings of the 28th ISTE International Conference on Transdisciplinary Engineering, July 5–July 9, 2021 (Vol. 16, p. 223). IOS Press.
Sedlmayer, M. 2018. Delivering organizational strategy with portfolio management. In The Handbook of Project Portfolio Management (pp. 9-18). Routledge.
Trzeciak, M., Kopec, T.P. and Kwilinski, A., 2022. Constructs of Project Programme Management Supporting Open Innovation at the Organisation’s Strategic Level. Journal of Open Innovation: Technology, Market, and Complexity, 8(1), p.58.
Willumsen, P., Oehmen, J., Stingl, V. and Geraldi, J., 2019. Value creation through project risk management. International Journal of Project Management, 37(5), pp.731-749.