Introduction
Background of the study
The world today is uncertain. Some of these uncertainties pose very great risks that affect our ability to achieve our goals and objectives efficiently. Since projects are intimately associated with goals and objectives, efficient and effective management of risk is a very crucial factor for the successful management of any project. Experts in the field of project management point out that failure to conduct timely and effective risk management assessments on projects can cause projects to exceed the financial plan that is the resources budgeted for, fall behind time schedules, miss critical performance targets, or exhibit any combination of these troubles.
Due to these, proper risk management can assist the project managers and in fact, the whole team responsible for delivering the project to properly mitigate both known and unanticipated risks on projects of all kinds and ensure that the projects can achieve their objectives within the set parameters hence satisfying all the stakeholders’ demands (Carbone and Tippett 2).
Carbone and Tippett (2) further assert that although there are a number of variables or factors that determine or influence the success of a project, in most cases, it is more likely that lack of adequate risk management will amplify the risk of failure. According to them, the old maxim, ‘failing to plan is planning to fail,’ appears to be appropriate to managing project risks. As projects increase in complexity and size, improving project success requires giving proper attention to risk management. Therefore, developing proper and effective strategies that are easy to comprehend and utilize for all stakeholders especially the project team is significant for the success of projects.
The concept of Risk Management
Managing risk is one of the most important functions in making any major project successful. According to Hubbard (46), a risk is an uncertain future event or condition. It can be a positive opportunity or a negative threat of actions and events. In this context, risk management, therefore, is the identification, assessment, and prioritization of risks followed by the coordinated and economical application of resources to minimize, monitor, and control the probability or impact of unfortunate events or to maximize the realization of opportunities. It can be argued out therefore that effective risk management should start with risk assessment.
Carbone and Tippett (5) claim that because of the unique nature of projects, there is a lot of uncertainty present in all projects. As result, identification and analysis of risks are required for effective risk management. According to them, one cannot manage risks if one does not characterize them to know what they are, how likely they do occur, and what their effect might be.
Research Questions
The study will seek to answer the following two questions:
- What is the role and importance of risk management in managing projects?
- What are the factors that influence risk management in managing projects?
Research Objectives
This research aims to achieve the following objectives:
- To establish the role and the importance of risk management in managing projects.
- To investigate the factors that influence risk management in managing projects.
Literature Review
Introduction
This chapter reviews studies in the area of risk management in managing projects.
Overview of Risk Management in Managing projects
Project Risk Management has developed into a recognized discipline that has its own rules. According to Chapman and Ward (7), project risk management is the practice of identifying, evaluating, and controlling uncertain factors that possess the ability to significantly disrupt realizable performance in order to evade or mitigate potential negative effects. Higuera and Haimes (32) point out that making timely and informed decisions by evaluating the prevailing and future situations of what is most likely to go wrong, as well as the probability and severity of the focused outcome is very crucial to risk management.
This entails the analysis and accurate evaluation of the trade-offs related to all the strategic options for risk mitigation in terms of their costs, benefits and the analysis of the impact of current decisions on future options. This process requires proper identification of risks, the detailed analysis of the identified risk, planning on how to deal with the risk, devising strategies to track all the identified risks effectively, controlling, and communicating of risks to all stakeholders particularly the project team that is directly involved in carrying out the project activities.
The Role and Importance of Risk Management in Managing Projects
According to Chapman and Ward (40), generally, projects are risky as a result of their common characteristics, by their design, and because of the external environment within which they are undertaken. The essential thing is not to keep risk totally out of projects, but it is to ensure that the inevitable risk associated with every project is at a level that is acceptable to stakeholders i.e. the funding party and is effectively managed in all ways.
Chapman and Ward (57) argue that all the parties involved in managing projects should welcome risk in their projects, since it enables and supports change, innovation and creativity as long as it is taken sensibly, intelligently, and appropriately, and as long as it is managed effectively. It is crucial to point out that not all risks are bad since the concept includes both threats and opportunities, there are uncertainties that matter because if they occur they would hinder the achievement of project objectives (threats), but there are also uncertainties whose occurrence would help to achieve those objectives (opportunities).
This is the fundamental reason why risk management in managing projects is such an important part of effective project management. Chapman and Ward (80) explain further that the whole purpose of risk management is to identify risks and be in a position to manage them effectively thus resulting to project success. The outcome of managing risks properly on a project is to ensure that the numbers of threats that materialize into problems are reduced as much as possible and to minimize the effect of those which do occur. It also results in more opportunities being captured proactively and turned into positive benefits for the project.
In conclusion, the role and importance of risk management in managing projects is of great significance in all kinds of projects. It enables one to save and gain many resources that can be wasted if uncertainties in project events are not dealt with in a proper manner. Effective management of risk leads to the reduction of obstacles that hinder the delivery of the project outputs and allows utilization of changes that occur. This leads to delivery of project outputs on schedule, on resources budgeted, and within specifications demanded by stakeholders as well as increasing the morale and reputation of team members.
Research Methodology
Introduction
This chapter describes the methodology that will be adopted to undertake the study in order to accomplish the already established objectives. This methodology includes the following elements: the research design, the data collection methods, the data gathering instruments that the researcher will use as well as the data analysis and presentation.
Research design
The study will adopt a descriptive approach in trying to assess the role and the importance of risk management in managing projects. The descriptive design will enable the researcher to come up with descriptive statistics that will assist in better understanding and explaining the questions under investigation in an appropriate and accurate manner as well as achieve the established objectives. According to Grimes and Schulz (145), a fundamental element of descriptive reporting is a clear, specific, and measurable definition of the disease or condition in question.’s
Data collection
The study will make use of primary data. These data will be collected by the use of well-structured and semi-structured questionnaires. The questionnaires will contain questions framed using the Likert scale format which according to Burns (260), ‘increases the probability that a unitary attitude is being measured’.
The instrument shall be divided into three sections, first section will seek data on the demographic profile of the respondents, the second section will capture the data relating to the objectives of the study and the last section will capture the qualitative views of the respondents on the role and the importance of risk management in managing projects. The aim of using the questionnaire is to generate reliable and valid data within a reasonable period at a minimum cost, which as Burns pointed out, can be a relatively cheap and quick way of obtaining information from various categories of respondents (14).
Data analysis
The study will collect both qualitative and quantitative data. Upon successful completion of the data collection exercise, the researcher will sort and code the quantitative data accordingly. Since the data collected for the two objectives will be in quantitative and qualitative form, two methods of data analysis will therefore be adopted to enable the researcher to conduct a comprehensive analysis.
The quantitative data will be analyzed using Statistical Packages for Social Sciences (SPSS) while the qualitative data will be analyzed by means of content analysis. The findings from the quantitative data will be presented in pie charts and tables. The researcher will generate various measures of central tendency to assist in explaining the variables under study. For qualitative data, conclusions will be carefully drawn after reviewing the responses from respondents. The study will also conduct a factor analysis. The factor analysis will be used to identify the major factors that influence risk management in managing projects (Burns 273).
Conclusion
The chapter discussed the research methodology. Here, the research designs that the researcher will use in order to obtain factual data that can maximize valid answers to research questions hence enabling the researcher to accomplish intended objectives are discussed. The methods the researcher will use to collect data i.e. questionnaires are discussed as well as descriptive statistics to analyze it. Thereafter, the findings will be presented and then conclusions will be made on the study based on the findings.
Bibliography
Burns, Robert. Business Research Methods and Statistics using SPSS. California: Sage, 2009. Print.
Carbone, Thomas, and Tippett Donald. ‘‘Project Risk Management using the Project Risk FMEA.’’ Engineering Management Journal 16.4 (2004): 1-17. Print.
Chapman, Roger, and Ward Gregory. Project Risk Management. Chichester: Wiley, 1997. Print.
Grimes, David, and Schulz Kenneth. ‘‘Descriptive studies: what they can and cannot do.’’ The Lancet 35.9 (2002):145-149. Print.
Higuera, John, and Haimes Gabriel. Software Risk Management. Software Engineering Institute-Pennsylvania: Pittsburgh, 1996. Print.
Hubbard, David. The failure of risk management: why it is broken and how to fix it. New Jersey: John Wiley & Sons, 2009. Print.