The use of risk management systems can asist with ERM implementations
- 1. I n today’s competitivemarketplace an organisation faces many challenges. The need to ensure value for money and deploy effective working practices has led to the merger of many of the larger businesses and companies. In addition, many organisations now often form a partnership or alliance when pursuing a business objective. As a result of these trends, those involved in a project are seldom located in a single office or even a single organisation, rather they will be spread throughout different organisations in geographically dispersed teams. Under such circumstances effective communication is essential, and it becomes necessary to ensure that the entire team is provided with updated real-time information, thereby ensuring that they are aware of the current status of the project and the progress of their work packages. Many tools Organisations typically employ a wide variety of software-based tools and solutions as an aid to effective project management. These tools provide the ability to manage, plan, and communicate. However, these are often separate tools, which, if not maintained correctly, may contain both repetitions and contradictions in terms of perceived goals or approaches to a project. In addition, there is often no single focused source of information to act as a benchmark or reference to the current status of the project/organisation. Clearly, this problem will be further compounded when a project involves multiple companies/organisations, each having its own preferred tools and solutions. One response to these difficulties has been a growing demand for assistance in the effective use of these separate tools, and for processes that help with management endeavours at both the project and business level, while ensuring that the bigger picture is not lost. In a separate but complementary development, many organ- isations are now exploring ways to harness new technologies and, in particular, using theWeb as a way to bring together their tools and legacy systems to create a shared data environment.The aim is to develop a culture where information does not swamp the individual, but aids their decision making and reduces risk. Equally important is the need to ensure that the right information is obtained within achievable timescales. Enterprise solutions To support a business organisation, an enterprise software solution is required which is able to provide the right level of information to the right levels of management at the right time. This will result in improved communications and visibility in terms of highlighting the potential issues for an organisation, and identifying who is responsible for addressing them. It has been shown time and again that improving communications within an organisation ultimately improves the chances of completing a project to cost, on time and to the IEE REVIEW SEPTEMBER 2000 45 PROJECT MANAGEMENT Networking for project success Karl Davey describes how the use of Web-based enterprise-wide project management software is solving the problem of real-time project management between geographically dispersed teams
- 2. required specification. The enterprisesolution should be based around the current business process, and has to be balanced with the sensible use of proven technologies. Such a system must be designed to ensure that everyone involved in a project or business process, i.e. project managers, planners, directors, risk owners, stakeholders and customers, has real- time access to project/business information. This information must be presented in a format that will aid, and not confuse, the decision-making process. Seamless integration with a company’s operations, as well as the capacity to provide a timely response to evolving risk and changing business requirements, are thus essential requirements for any effective enterprise software tool. To be of real benefit to an organisation it is important to ensure that the solution brings together all the tools and legacy systems necessary to manage the project or business. This allows the formation of a central shared data environment, which contains a consistent and up-to-date picture of the project or business.This real-time information is obtained from effective system integration with existing management tools, which can include planning, requirements management, accounting and task management.The embedded nature of this type of integration ensures that data entered into the system is automatically shared throughout the components of the enterprise solution, cutting down the time required for data entry and reducing the possibility of errors or contradictions appearing in the system. Web technologies With the rapid realisation that the Internet and similar technologies are here to stay, and can be used for an organisation’s mission-critical services, many application vendors are now producing Web-based versions of their software solutions. It has become clear that significant savings can be made within an organisation by moving away from client/server software architectures and adopting Web architectures. A benefit of Web-based systems is that they do not require complex client software to be installed on the user’s computer. A Web-based system simply uses an Internet browser such as Netscape or Microsoft’s Internet Explorer which, almost invariably, is already installed on the client’s machine. This thin client or ‘thinware’ approach has a number of distinct benefits to a user: 5 multi-user access (not standalone) 5 robustness and security 5 scalability – from a few local users to many thousands world-wide 5 a secure true real-time shared data environment across partner companies 5 reduced installation and configuration costs. This approach allows authorised users to share real-time management information, news, project and programme updates on a world- wide basis, irrespective of their temporal or geographical location. The Web and risk management Recent high-profile project failures are attributable to a lack of effective risk management across organisations. In many cases, project and business risks were identified, but too little was done in terms of effective mitigation. Part of the problem is that risk management is often seen as a stand-alone or specialist process, rarely fully integrated into the management culture, resulting in risk management software tools being developed as separated stand alone programs. Clearly, such problems will be exacerbated by the need to manage risk across large multi-company or multi-national projects. To address the issue of integrating risk as part of the project management culture across geographically dispersed project teams Strategic Thought Ltd developed Active Risk Manager (ARM), a fully integrated Web-based enterprise risk management solution designed to track both business and project risk across an organisation.ARM has been designed to support full integration with the leading project management planning tools – an important marketing requirement that also helps ensure that ARM becomes firmly embedded as part of the project’s management strategy (Fig. 1). This level of real-time interaction with planning packages allows a complete project work breakdown structure (WBS) or programme to be imported into the ARM application, so that risk can be identified and assessed against any WBS node on any level on the structure. 46 IEE REVIEW SEPTEMBER 2000 PROJECT MANAGEMENT
- 3. PROJECT MANAGEMENT However, simplyanalysing risk against a WBS structure or the project programme will fail to provide the overall picture, which requires an assessment of risk against the identified project requirements or goals that must be met by the project. In addition, there is often the need to assess the levels of risk for future projects. In this case, WBS structures and detailed programmes may not yet be defined or even developed. The solution is to assess risk against each of the requirement or goals that the future project would set out to meet. This approach has been adopted by the Ministry of Defence’s Procurement Agency to determine future defence procurement prog- rammes. By analysing the risk relating to future equipment requirements it is possible to define the way ahead with many projects. Analysing risk at this early stage of the project life cycle ensures an understanding of the levels of potential cost and schedule risk against each of the requirements. Requirements managers can then use this information to scope the require- ments of their equipment into a specification which is both realistic and achievable within the defined schedule and budget constraints. To achieve this link to the process of requirements capture, ARM offers integration with the QSS DOORS requirements management tool.This allows: 5 requirements to be related to project/business activities 5 risks to be assessed against the established requirements breakdown structure (RBS) 5 effective ongoing management of legacy requirements 5 calculation of total levels of risk against individual requirements based on the risk identified against related activities. ARM recognises the importance of communication. Once risks are identified this information must be shared by the project team. It is important that information is secure and the technology used is robust. ARM, being an enterprise-based solution, uses a central Web server, with local browsers enabling multiple users to communicate and access the applications, data, analysis and reporting options (Fig. 2). As the breakdown structure formats (RBS, WBS) are generated from real-time integration with the available project planning and requirements management tools, any number of interrelated projects can be linked together in the overall business/project breakdown structure. This allows the identification and assessment of risk by project, programme, business area or from the entire ARM hierarchy. It is also possible to tailor the workspace to reflect equipment and organisation breakdown structures in the overall business/project breakdown structure; thereby gaining an overview of the bigger picture. To ensure that the bigger picture is up to date and valid,ARM notifies users whenever a project plan or requirement breakdown structure is changed, prompting the user to update the structures displayed within the application. Users are also notified of any risks that cease to be relevant, following changes in the project or related requirement breakdown structures. Given the time and resources so often wasted managing risks which have been overtaken by events or the evolution of the project, then the efficiency gains from having a real-time update capability for risk will be readily apparent. Once risks have been identified and mitigation strategies developed, it is vital that this information is communicated across the project team in a timely manner, thereby ensuring that risks and actions are addressed within windows of opportunity and the potential for mitigation realised. ARM provides a number of functions to aid this process. First, there are the features that are intrinsic to ARM’s Web-based architecture, enabling users to log onto the system at any time and in any location. This allows a risk owner to rapidly undertake current IEE REVIEW SEPTEMBER 2000 47 1 ARM’s integration with leading project management planning tools ensures an integrated approach to project management
- 4. and post-mitigation targetassessment against each risk, and combine them to form an overall picture of their current risk exposure and mitigation effectiveness. As ARM forms part of an integrated solution to risk, the mitigating actions can be transferred back into the project or business plans. Such ‘what if’ scenarios can provide a basis for ensuring that strategies for risk management are feasible within the confines of the current programme and available resources. Once plans are approved, the target risk exposure, management strategy plans and related mitigating action effectiveness can be monitored, and risk contingency costs tracked and future spend predicted. ARM also exploits the power of email in ensuring effective communications with risk owners. Actions and risks, once approved, are emailed directly to owners using Microsoft Outlook, detailing any required action, along with the subsequent timescales for implementation and closure. In summary, ARM’s use of Web technologies helps address some of the current shortfalls with today’s risk management tools and process by providing the following key benefits: Integration – links to established management tools provide a total environment geared around supporting the active and successful mitigation of risk. Identification– risks can be mapped against any project, organisation or business breakdown structure. Once a risk has been identified, the ARM assessment phase integrates both qualitative and quantitative processes, reducing the time required to assess and understand risk. Understanding– global parameters related to levels of acceptability and risk can be set with the use of ‘traffic lights’, automatically identifying the significance of risk issues. The system allows management to quickly‘drill down’ through the structure and find the root causes of risk without wasting valuable time and resources The future The merging of business processes and Web technologies presents many opportunities for an organisation to improve the efficiency of its processes and practices. The use of these shared data environments means that processes can be improved and streamlined, inconsistent information eliminated and the cost of data entry reduced. References and links can also be set-up within the solution to reference essential project documentation sources and memorandums creating a central repository for crucial project data.Tools such as the Windchill environment from Parametric Technologies are leading the way in demonstrating the value of Web-based project collaboration. In addition, planning tools such as Artemis and Primavera Project Planner are being enhanced to use Web technologies - likely to be followed by tools which address resource management and quality control. The common consensus is that by applying these new technologies to project management culture and toolsets, improvements will be seen within the ‘buy-in’ to project management processes, and therefore the understanding of project goals. This in turn maximises the chances of an organisation being successful through the completion of its projects to time and budget, leading to improved financial performance. Good project management has always been about communications, a message that is being reinforced and strengthened through the communications power of the Internet allied to the adoption of Web technology by a rapidly increasing number of established project management tools and techniques. © IEE: 2000 Karl Davey MIEE is a consultant at HVR Consulting Services Limited, specialising in the provision of risk management services, tools and training. He can be contacted at HVR-CSL, Selborne House, Mill Lane, Alton, Hants GU34 2QJ (tel +44 (0)1420 87977; fax +44 (0)1420 89819; karl.davey@hvr-csl.co.uk; www.hvrgroup.com or www.risktools.co.uk). 48 IEE REVIEW SEPTEMBER 2000 PROJECT MANAGEMENT 2 ARM provides real- time access to risk data across the enterprise