Case Study 01
P2 Industries recons the need for effective risk management, given the fast
pace in telecom sector. Company spends 20% of its revenue in R&D though industry benchmark is 15%. Still small percentage of projects, which reach the commercialization stage, are able to recover the R&D costs. Management attribute the problem to lack of effective risk management.
PM: I have researched the risk management practices of our competitors and based on my research, I have been able to develop a risk management templates, which we can use in our company.
Sponsor: I have looked at the template. You have used the words and expressions which are not used in P2. Do we have to change the way we manage the projects to use these templates? Does this mean that we have to make major changes to our risk management methodology?
PM: I am of the view to use these templates in existing format. If other companies are using it, we can use them too, given the similarities between our businesses. Also, I have been able to obtain the probability distributions used by those companies, which we can use as it is.
Sponsor: Should not we modify the templates based on our processes and project life cycle phases? Should not the distributions be validated and calibrated based on our company data and standards?
PM: I understand your reservations. But I do not think this will be an issue. I would like to use these templates in the next project as test case. If everything goes well, this will be equivalent to validation of templates.
Sponsor: I need to think about it bit more. I am not sure if we should introduce them before training our employees.
1. Can the templates be used from one company as it is? Or one should modify them before adopting them.
2. Can probability distributions be used from one company as it is? If yes, under what conditions? If no, how can one develop the probability distributions?
3. What do you understand by the term 'validation' in context of the discussion?
4. Assume that one of the template adopted by PM is RAM (Risk Assessment Matrix). How will you validate it for P2? (Give general approach)
5. Can employee start using the templates without some kind of formal training?
Case Study 02
Z3 Industries is in process of developing a product as a result of commercialization of a research project. High-tech product, if launched within next four months will provide the competitive advantage to Z3. This will enable Z3 to dominate the market for a year, before competitors will catchup. Product will be developed in six phases:
a. Preliminary planning,
b. Detailed planning
c. Execution/design selection
At the conclusion of each phase, a stage gate review is held with all the major stakeholders. By the end of second stage (after Detailed Planning stage) a meeting is being held between the PM and sponsor to review the detailed plan and identify and potential problem areas which will require the attention of project sponsor
Sponsor: I am unable to understand the document sent by you titled 'Risk Management Plan'. All I see in it is WBS (work breakdown structure) till level 5 and all the work packages with the associated risks. You have identified 200 risks in this document. Why there are so many risks? Furthermore they are not categorized in any manner. Should not they be categorized based on the methodology provided in the Risk Management Plan?
PM: All those risk will impact the design of the final product. We should be able to select the design with the lowest risk. Unfortunately our Project Management methodology does not provide any guidelines on how to develop RM Plan.
Sponsor: I do not see why one should perform in-depth analysis of 200 risks. This is too much of effort with regard to return. And where are the probabilities and impacts of the identified risks?
PM: My team will identify probabilities and impacts near the prototype development, which is due next month. By that time some of the risks will go away altogether.
Sponsor: if this is the case then why to spend all this energy and effort to identify the risks in the first place? You have spent too much time and resources on this step. If you keep spending same amount of efforts on all the RM steps, we will go over budget.
PM: I believe that remaining steps will require less efforts, rather 10% less than the allocate budget, and we will stay on budget.
1. If the document given to the sponsor was Risk Management Plan?
2. Did the project manager actually perform effective risk management? Provide reasons.
3. Was appropriate time and money spent on the risk identification?
4. Should one step be allowed to 'dominate' in risk management process?
5. Is there any significant benefits of work already done under risk identification?
6. If the identified risks should have been categorized? If so, how?
7. Can probabilities of occurrence and the impacts be accurately assigned to all the 200 risks?
8. Should Project Management methodology provide the guidance for development of Risk Management Plan?
9. What are your thoughts about the PM comment that, "My team will identify probabilities and impacts near the prototype development, which is due next month".
10. At what stage Risk Management Plan should have been formulated and why?
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