Table of Content
- 1 I. Introduction
- 2 II. Risk Management and Risk Management Processes
- 2.1 i. Classification and Identification of Risks
- 2.2 ii. Evaluation of Risks
- 2.3 iii. Managing the Responses to the Risks
- 2.4 IV. The Reviewing and Monitoring of the Risks
- 3 V. Conclusion
- 4 References
Modular X is an American corporation working in the field of producing various forms of energy batteries for wind farms, and it has a proven track record in this field. However, Modular X has no working experience in the European market where the company has got a new contract for the first time. This contract is an essential contract for Modular X because the appealing reputation for a company is one of the requirements to succeed in the market, and the status in the European market for Modular X is going to be based on this project (Bundhoo, 2014). This contract is of a high budget to design, develop, and install bespoke batteries for a large wind farm in the UK. The primary issue in this project is that Modular X does not have any previous experience of working in Europe, which is an essential thing to be considered while making the risk management plan for this project. The CEO of Modular X is doubtful regarding the possible risks in this contract. Therefore, the CEO of Modular X recently asked the risk manager of the project to develop an appropriate risk management process for the company that can help to manage the possible risks and challenges which might be faced in this regard. The risk manager of this project must provide the appropriate risk management process, strategies, and the recommended propositions that lead the CEO of Modular X to make informed decisions. However, the unavailability of risk information is another difficulty that the risk manager is facing in this project, which caused a considerable lack of information concurrently with the lack of risk management experience in the European market. Moreover, working in the renewable energy field in the UK currently is a big challenge, especially for a foreign company (CarbonTrust, 2019).
To develop an appropriate risk management process, several terms and concepts should be more clarified to understand the point views of the Modular X Windfarms Energy Bespoke Batteries Project’s risk manager. First, in the idea of project management, there is no project without any uncertainties or risks, and there are two levels from the dangers, which are the specified individual risks and the overall project risks (PMI, 2017). Moreover, the Project Management Institution has defined uncertainty in the Guide to the Project Management Body of Knowledge as it is “an uncertain event or condition that, if it occurs, has a positive or negative effect on a project objective” (PMI, 2017, p.720). Secondly, risk management has been identified as it is “a process that allows individual risk events and overall risk to be understood and managed proactively, optimizing success by minimizing threats and maximizing opportunities” (APM, 2012, p.10). Therefore, risk management is also known as “the processes of conducting risk management planning, identification, analysis, response planning, response implementation, and monitoring risk on a project” (PMI, 2017, p.395). Lastly, the risk register is the tool of recording, which has been defined as it is “a repository in which outputs of risk management processes are recorded” (PMI, 2017, p.720).
From the point view of the risk manager in the project, it is comprised of four phases, which are the designing phase, the developing stage, the installation phase, and transporting the batteries from the US to the UK. As a result of working in the field of producing various forms of energy batteries for wind farms, Modular X Company is familiar with the designing and the development phases. On the other hand, the Modular X Company has a substantial lack of information, especially the risk management team, and it has no working experience in the UK where the installation phase is going to be. Therefore, having a contract with a local UK-based project management consultant to manage the installation phase is going to optimize the success of that phase. Moreover, the Modular X working field is different from the shipping field. However, by having another contract with a shipping company, Modular x will pass that challenge. Furthermore, that does not mean Modular X is not going to face risks in the other phases. Each of these phases has its risks that should be identified, evaluated, treated based on the plan risk responses of these risks and monitored which means going through the suggested risk management process.
II. Risk Management and Risk Management Processes
Risk management is essential to do any project. It is the kind of administration that involves managing both positive and negative aspects. Also, understanding its strategies is going to lead to have informed risk management processes and plans, which lead to reducing the project risks (Yim et al., 2015). Thus, the primary aim of risk management processes is to highlight the possible dangers that a company can face in every phase and help the project management team to overcome the identified risks and challenges by suggesting various mitigation strategies (PMI, 2017). So, the risk management processes for Modular X in this regard are going to assist the company in delivering this project successfully. Simultaneously, it is essential to have simple yet comprehensive risk management processes, as shown in Figure 1, in this regard to add value to the organization and not adding further complexities to the project. However, in the scenario of this case, several risks must be considered before proceeding.
Nevertheless, dividing the project into phases by using the work breakdown, structural methodologies can positively impact the risk management process. It can lead the risk manager to deliver the right risk management process for this specific project (Siami-Irdemoosa et al., 2015). Besides, dividing this particular project into phases should be based on two primary principles, which are the kind of work in the stage and has Modular X done that phase before or not? By taking these principles in consideration, the risk manager has divided the project into four main phases which are the designing phase, the developing phase, the installation in the UK phase, and since Modular X is a US company and the project in the UK, transporting the batteries from the US to the UK was added as a phase to the project known phases. However, as a result of working with Modular X in the field of producing various forms of energy batteries for wind farms, Modular X has become familiar with the designing and the development phases.
On the other hand, with no working experience in the UK where the installation phase is going to be done means that Modular X is going to face most of the risks in that phase due to the lack of the project’s risk management experience in the UK besides the lack of information related to that phase. The data is essential to the risk manager because it plays a beneficial and supportive role for the risk manager. The project risk manager of Modular X needs the information in this project to offer the appropriate risk management strategies to the CEO of Modular X to take an informed decision over which the chances of risks become less, leading towards intended and reliable results from this project (Ward, 2001).
Figure 1. The Risk Management Processes (PMI, 2017).
i. Classification and Identification of Risks
For the classification of the primary sources of risks, phases are going to help the risk manager to identify the risks that are related to each phase. Hence, identifying the risks of each stage, which is the first step of the risk management process is going to be based on that classification. It means that Modular X must generate a list with all risks that the company could face in every phase of the project and record them in the risk register of the project (Gray and Larson, 2006). However, the risk manager of this project is facing difficulty in identifying all the threats. Opportunities that are related to the project are caused by the unavailability of enough inputs to this process, such as a database or a completed project management plan, which ends up with a considerable lack of information. Even so, based on the available data with the help of using the methodology of PMI in classifying the sources of risks as shown in the Risk Breakdown Structure (RBS) in Figure 2 and by using brainstorming technique as data and information gathering technique (PMI, 2017), the primary sources of overall the project phases’ risks have been initially classified from the point view of the project’s risk manager into three primary sources as shown in Figure 3.
Figure 2. The PMI Risk Breakdown Structure (RBS) (Gray and Larson, 2006, p.214).
Figure 3. The Main Sources for Risks in The Windfarms Energy Bespoke Batteries Project.
ii. Evaluation of Risks
The next major step in the risk management process, in this case, is the evaluation of the identified risks. It is important to analyze the highlighted risks and their sources and determine their impact on the project to get the best strategies to overcome these risks to make the project successful.
a) The Evaluation of the Risks in the Shipping and the Installation Phases
By starting with the external risks, these risks are those risks that come from events that are out of control, which means it is difficult to deal with these risks, but it is possible to reduce or transfer the impact of these risks (Ernst and Young LLP, 2017). There are several major factors in this regard, such as the differences between the market and the economy in the US and Europe, especially in the UK. Besides, the UK is facing severe political unrest in this regard. The main reason for that unrest is more than half of the UK citizens want to part from the EU, but the establishment of the country is not willing to do that (BBC News, 2019). The political instability in the UK having no previous working experience in the EU market is making the market, and the economic condition of the UK is not clear and risky from the point of view of the project risk management. Another external factor in this context is regulatory. The UK country has good relations with the US, and it is not an issue for the companies of the US to start their projects in the UK. Simultaneously, Modular X cannot ignore the fact that every country has its legal requirements, different dynamics of project management, and risk assessment. Thus, Modular X might face various legal challenges in this regard, such as facing difficulties in getting the required approvals and the other legal requirements from the UK and the US central government departments and complying with their procedures. These legal risks were also identified as might add cost to the overall cost of a project in the form of fines (PMI, 2017).
Consequently, Modular X needs to take good care of legal aspects before starting this project. Besides, the weather and the environmental factors are essential in this regard as various human-sponsored events, along with natural disasters, can cause multiple challenges for the company, and it must develop plan B in case of such incidents to deal with them appropriately. These environmental and weather risks can affect the company’s success and cause a negative impression of the company (PMI, 2017). On the other hand, the nation of the UK is a highly advanced nation like the US. Therefore, the advantage of this factor is that it would become easy for Modular X to hire local staff, subcontractors, and consultants as they have diverse knowledge regarding the project domain of the company. Also, that will help to reduce the negative impact of workforce nationalization UK’s law on the project. Significantly, by taking an overview through these external risks, these risks are related to the installation phase, which is going to be done in the UK, and the batteries transferring phase more than the other stages. Meanwhile, Modular X has not done any shipping to the UK which means Modular X is not familiar with all the risks of the shipping phase.
b) The Evaluation of the Risks in the Designing and the Development Phases
However, the designing and the development phases of these windfarm storage batteries have a smaller number of risks and different types compered by the installation phase in the UK due to having enough working experience in these two phases. Many various risks are related to these phases, such as the differences between the US measurement system and the British measurement system in the customary units (Open Textbooks for Hong Kong, 2015). Not only that but also every country has its standers and requirements in designing and manufacturing any product which may cause human errors and complexity or a misunderstanding between the designing team of Modular X and the client of the project. Besides, according to the BBC NEWS, the chief executive of Scottish Power Company said that there is a large and significant battery storage system will be built for the largest wind farm in the UK by Scottish Power Company and it will be fully operational by the end of 2020 (BBC News, 2019). Also, according to the Carbon Trust which is a company that works in the Carbon management field, the European Union set an aspirant goal which is 20% of the energy across all Europe should be coming from renewable sources by 2020 and UK needs to deliver a 15% from that a target which makes working in the renewable energy field in the UK in this time is a big challenge (CarbonTrust, 2019). The role of design and development phases in manufacturing firms in this project is to make sure that the Energy Bespoke batteries of the wind farms in the UK are going to meet the desired objectives which are based on the performance, customer demands and the UK government regulations and its standards (Nambiar, 2019). By taking all that in consideration, Modular X is about to face many high impact risks regarding the technical and the management which are primary sources of risks in this project concurrently with the high expectations of the client which might cause a considerable dispute between Modular X and the British side.
iii. Managing the Responses to the Risks
Choosing not only the appropriate response but also the best one to these highlighted risks is the third step in the risk management process, which should be based on the evaluation of the probability and impact of these risks as an input for this process (PMI, 2017). It means that the company needs to devise and implement robust, unique strategies for dealing with and responding to the identified risks to deliver this project successfully. Also, the risk response should lead the project from the unacceptable risk zone to the safe area or a region with a low number of risks and more acceptable risks with minimizing the losses (Vladimirovna et al., 2017). Also, putting the identified risks into groups or categories and focusing the attention on the areas of related and high impact risks, as what the risk manager of this project is doing, will lead to more effective and generic plan risk responses (PMI, 2017). Moreover, the ways of responding to the risks mostly depend on the type of these risks. In reality, the means of responding to the threat risks are many such as eliminate them, which is possible by solving all the issues that are related to these risks and get rid of these risks’ sources, which could be accompanied by escalation if necessary. Besides, transferring risks into other companies and avoiding them as much as possible is also from the ways of responding to these risks. However, if that risk is inevitable, the company should try harder to reduce or sustain the impact of that risk to a certain level (PMI, 2017). According to Professor Tristano, the lecturer of the Risk Management Course at the University of Leeds, the lifecycle of threat risks management is going to be as illustrated in Figure 4.
Figure 4. The Risk Management lifecycle of The Threats Risks (Sainati, 2019).
On the other hand, there is another different type of risk, which can be called an opportunity. For example, in this case, the likelihood that said the UK is a highly advanced nation which is a great thing to Modular X which means the ways of responding and dealing with that is going to be different. However, considering the opportunities first in which the investigation would be on what are the type of risks that are involved in the possibilities. Thereafter, the way of responding to these risks will be based on that investigation and based on the methodology of PMI in dealing with the positive risks. Additionally, there are several ways to deal with and respond to these opportunities.
First, the creating method, which an escalation accompanies most of the time. Also, the exploit of these opportunities, sharing them, and sharing their benefits will increase productivity in work within the project and will increase the probability of achieving the objectives of the project faster when everyone follows these ways. Also, accepting these opportunists with retention, they are a way of responding (PMI, 2017). As illustrated by Professor Tristano, the lifecycle of the opportunities risks management is going to be as shown in Figure 5.
Figure 5. The Lifecycle of The Opportunities Risks Management (Sainati, 2019).
In the same manner, the risk manager of Modular X Project for a UK’s Windfarm Energy Bespoke Batteries did a study for that project and came up with several recommended suggestions and solutions in order to achieve the success of the project. Additionally, there were some points that have been taking into consideration by the risk manager before taking this step and recommend these suggestions for each phase.
a) The Responses to the Risks in the Shipping and the Installation Phases
In contrast, the project risk manager has taken some points into his consideration, especially for this phase. Having no previous working experience in the UK where that phase is going to be done but with enough experience in doing the actual site work was the first point that was taken into the risk manager’s considerations. Secondly, the tremendous lack of information that the project management team is facing in this phase. Also, the lack of experience of the project’s risk manager in the EU market is another point.
Moreover, every country has its different dynamics of project management and its risk assessment. And the last one is the difficulties for a foreign company to manage a project in another country. Because of all the above, the project risk manager is suggesting that Modular X should hire a UK-based local project management consultant to manage only the installation phase. There is no question that by hiring the UK-found local expert consultants is going to ensure more the implementation of local project management strategies, adaptability, performance, and efficiency for this specific phase. Also, the local consultants are aware of regional determinants of project implementation. Therefore, they will suggest strategies and tools assure success without compromising the local quality standards. Another advantage of a local project management consultant includes the local market knowledge, such as the regional market growth, size, and changes that are necessary to develop the project successfully (Ho et al., 2015). Besides, the required tools to monitor and control project management activities are also based on local market analysis. Furthermore, the local consultants also analyze the goals and objectives of Modular X, since it is a foreign company, from a local point of view, and suggest necessary changes to comply with the local interest in the UK. Accordingly, the local UK-based project management consultant is going to apply the tools and techniques and analyze the project management based on the UK requirements and standards.
Moreover, the reach and adaptability of project management techniques also improve by having a local consultant. Thus, Modular X should hire a UK local-based consultant to develop the understating of phase needs and demands locally. On the other hand, local consultants may cause delays and reduce the overall efficiency of the project if they are not capable enough to understand the requirements of the project (Badewi, 2016). Also, the local UK-based project management consultants may not be aware of US corporate culture. They may not wholly understand the management requirements and methodologies of US-based companies such as Modular X.
In contrast, hiring a local UK-based project management consultant to manage that phase is going to transfer all the external related risks of that phase from Modular X’s responsibilities to the local consultant. Thus, Modular X must find a reliable and reasonable UK based local consultant before starting the project; otherwise, the company may face project delays and failures. Along the same lines, since Modular X does not have experience in the shipping field and it is not a part of its working field, shipping the batteries from the US to the UK should be done by a specialized company in the shipping field. The shipping company should provide insurance with full coverage to all costs of damages that might happen to the batteries. Correspondingly, hiring the UK local project management consultant and having a shipping contractor is going to cause an additional cost to the planned expenditure for the installation and the transportation phases. However, these suggestions are going to put Modular X in a more safe condition and will help to optimize the success of this project by minimizing threats and maximizing opportunities in these two phases.
b) The Responses to the Risks in the Designing and the Development Phases
However, Modular X is a US-based company working in the field of designing and developing the energy batteries of the windfarms and it has a record of functional experience in that. And since the US suppliers cannot offer services to the company in the UK, and if any of them is willing to do, then the prices would be increased beyond the scope of the project. It would eventually result in project failure. The recommended solution for doing both phases is by keeping Modular X the designing and the developing stages locally inside the US. Nevertheless, Modular X needs to reduce the risks of these phases by hiring few designing experts from the UK. Hiring these designers experts who are from the UK and having complete knowledge about the differences between the US measurement system and the British measurement system and the differences in the standers and the requirements between the US and UK, will reduce the number of human errors and the complexity and misunderstanding between the designing team of Modular X and the client of the project.
IV. The Reviewing and Monitoring of the Risks
In the last place, the final phase or the previous step of the risk management process developed for Modular X is going to be reviewing and monitoring the highlighted risks that might be faced by the company in this project and the responses that have been suggested to manage these risks. It is essential for Modular X to review and monitor all the identified risks, their factors and the answers to them to make sure that these risks are under control by comparing between the actual condition of the risk and the risk management plan and make changes in the risk management strategies if necessary (Ho et al., 2015). The risk management plan must be reviewed continually to avoid any further issues and challenges. Also, implementing a robust risk management plan filled with all the needs of the company from this project will help to evaluate the performance of this project’s risk management strategies (Aven, 2016). In the same manner, it would become more accessible for Modular X to improve its risk management strategies in this regard.
To conclude, this study aims to develop a robust and appropriate risk management process for Modular X Company. It can help in managing the possible risks and challenges that the company might face specifically in this project and provide that to the CEO of Modular X to approve it before starting the project. Also, the main aim of these risk management processes is to minimize the threats and maximize the opportunities to achieve the objectives of the project. However, before doing all of that, dividing the project into specific phases by using the work breakdown structural methodologies was needed to make the task of the risk manager easier, which was asked by the CEO of Modular X. So, the project was divided by the risk manager into four phases, which are a designing phase, developing phase, transportation phase, and the last one, which is the installation phase. Concurrently, the study suggests implementing a four-stage risk management process before starting and during the implementation of the project which are identifying the risks and classifying their sources into categorizes, evaluate them, choosing the best treatment for each of them and at the last one was reviewing and monitoring these risks and the responses that have been taken to manage them. In particular, the risk manager of this project identified the primary sources and factors of the risks into three main categories, which are the external ones, the technical, and the communication risk factor, which is one of the project management risks’ factors. Also, the study suggests a proposition for each phase in the project, which is going to help the CEO of Modular X to make informed decisions that lead to the chances of risks less, leading toward to deliver this project successfully. These suggestions are going to start by hiring designing experts from the UK who are having complete knowledge about the differences between the US measurement system and the British measurement system and the differences in the standers and the requirements between the US and the UK to reduce the number of human errors and the complexity and misunderstanding between the designing team of Modular X and the client of the project in the designing and developing phases. Secondly, due to the differences in the working fields between what Modular X is doing and the shipping, having a contract with a specialized shipping company, with full coverage insurance can cover all costs of damages that might happen to the batteries during the transporting phase, is going to transfer all the phase’ risks away from the Modular X responsibilities. Lastly, hiring a UK-based project management consultant for the installation phase is only due to the lack of knowledge and work experience in the EU market. By employing that UK-based consultant, Modular X will avoid and transfer all the external risks that are related to the installation phase. Subsequently, these suggestions are going to put Modular X in a safer condition and will help to optimize the success of this project by minimizing threats and maximizing opportunities that will be explicitly faced in this project.
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