Risk and Procurement Management BSS054-6 Assignment Sample

Introduction

Risk management is regarded as the process of identification, assessment, and control of the risks that an organization faces. An organization might face a risk from any of its sources while incorporating a new process. A risk management plan can be developed for the Heathrow Airport’s agreement to the T5 project that will provide an idea of the risks involved in the process and the processes to mitigate those risks.

Risk Management Plan

A plan is prepared by the manager of the project to identify the risk that is involved in the project to estimate the possible impacts of the risks on the project. The project also devises the responses that can make against the risk. A thorough periodic review of the risk management plan is required to keep the plan moving and maintain the efficiency of the plan (Barreras, 2019). A risk management plan can be made for Heathrow Airport’s T5 project that is used to increase the passenger capacity and for the formation of high-quality infrastructure. The risk management plan can be given as follows:

• Identification of Risk: The various risks that have been identified for the use of T5 are as follows:

1. Strategic Risks
2. Risk of time
3. Risk of Productivity
4. Risk of budget overrun
5. Risk of communication
6. Risk of regulation
7. Economic risk
8. Risk of Operation
9. Risk of Weather
10. Risk of Technology

• Analysis of Identified Risks: An analysis of the problems that the risks will cause can be provided as follows:

1. Strategic risk can be the risk of not being able to meet the objective of the project
2. Time Risk can be that the organization will not be able to comply with the schedule of the project. The organization might exceed the period of the contract that might fail to deliver according to the schedule of the phases of the project (Davis and Perez, 2019).
3. Productivity risk can be the recruitment of qualified workers might be low or the turnover the qualified workers might be high.
4. The budget risk might be the organization’s failure of meeting the budget
5. Commination risk might be the poor communication between all the concerned parties responsible for the project
6. Regulation risk can be issues of the contract or issues related to the laws guiding the project. Environmental issues that might block the progress of the project.
7. Economic risk can be an abrupt increase in the cost of equipment, material, and labor than the estimated values for the project.
8. Operational risks can be delays in the delivery of the materials, equipment that are required for the work.
9. Weather risk can be poor weather conditions halting the construction.
10. Technological risks can be inconveniences that are caused by the various technological devices required for the project.

• Risk Prioritization: The risks can be prioritized depending upon the magnitude of the risks to take the required action. The risks number 9 and 4 can be regarded as severe showing that the risks need to be given maximum priority. The risks numbered 2,3,7 and 8 can categorize as major showing that they need to be given the most priority after the severe ones (Zhang and Chu, 2011). The risks numbered 1,8 and 10 can be regarded as moderate and risk number 6 can be regarded as minor, which needs to be given the least priority.
• Risk Treatment: The strategies that can be developed for the risks numbered form 1-10 are as follows:

1. Verifying the activities and reviewing the deliverables for strategic risk.
2. Monitoring the activities according to the schedule for time risks.
3. Guaranteed number of qualified workers to be delivered by the contractors for the productivity risk
4. Monitoring the profit and loss and the balance sheet for budget overrun risk.
5. Defined communication channels between all the professionals to avoid communication risks.
6. Awarding the contracts depending on the quality for the regulator risk.
7. Keeping proper estimate of the cost by taking inflammation for a longer period into account for economic risk (Wells, 1997).
8. Estimating the budget by taking checks of the inflammation for operational risks.
9. Designing the risks in a way that the project can continue in all seasons of the year for weather risk.
10. Closely monitoring all the technological processes of the company and having a backup for the data for technological risk.

• Risk Monitoring: The plan needs to be monitored regularly for the smooth functioning of the plan by a review team.

Key Performance Indicators: The key performance indicators help in indicating the effectiveness of the plan by defining the given values.

These indicators determine the effectiveness of the plan devised how the plan has done so far what the plan wants to achieve in the future (Hanson and Kalyanam, 1994).

Identified Risks: The risks that have been identified in the whole process of the T5 project are the identified risks. The identified risks are Failure in technology, Malfunction of the software, hacking of the cyber data, Failure in an upgrade of software, Delays in licensing, Threats of security, Quality control, Compromising security.

Risk Criteria: The risk criteria are used in the determination of the magnitude of the risk. The risk criteria show if a risk is acceptable or non-acceptable. The risk criteria can be given by the probability impact model and risk register.

Probability Impact Model

This model provides the likelihood of the risk to occur and the impact the risks will have on Heathrow Airport

Risk Register

The risk register is the provider of the record of the identified risks and the magnitude of the occurrence of the risks.

The risk of leadership needs to be mitigated by accepting the flaws and taking a lead to direct what needs to be done. The risk of supply chain and quality management can be mitigated by proper interaction with both teams to find the appropriate ways to find solutions to these risks. The risk of waste management can be mitigated by reducing waste production and finding new ways to treat the waste (Kosutic, 2016).

Monte Carlo Simulation Model

The Monte Carlo Simulation model predicts the difference in all the possible outcomes of probability. The model is used for analyzing the uncertainties and risks that can occur in an organization for the implementation of a project. The model converts the occurrence of risks into variables for the easy assessment of the risks. The Monte Carlo model can be used for analyzing the risks that are involved with the implementation of the T5 project at Heathrow Airport. The involvement of variables makes the makes more suitable for the analysis as the model can produce quality output (Johansen, 2010).

Monte Carlo Model for Fixed Price Contracts: The fixed-price contract can be defined as the contract where the price is already set for a work that has been specified beforehand. In this contract, the owner pays for the labor of the contractor. The Monte Carlo model can be used in the decision-making process of a fixed contract as the model will provide the required results of what needs to be the exact amount that needs to be paid by the owner.

Monte Carlo model for Cost Plus Contracts: The cost-plus contract can be defined as the contract where the payer has to pay the actual cost along with an additional amount for the work. The payer pays for the additional services of the contractor. The Monte Carlo model will help in the decision-making process as the model will provide all the possible outcomes by a thorough analysis of the variables present. This will help the payer in making their decision of payment.

Conclusion

A risk management plan was developed for the use of the T5 project at Heathrow Airport to understand the risks involved and find ways to mitigate those risks.  Recommendations were made to mitigate the identified risks. The Monte Carlo model was used to analyze the variables of the T5 project and provide an assessment of the involved risks.

References

Barreras, A.J. (2019). Risk management. [online] Pmi.org. Available at: https://www.pmi.org/learning/library/monte-carlo-simulation-cost-estimating-6195 [Accessed 9 Dec. 2021].

Davis, M. and Perez, Y. (2019). Identifying and Managing Business Risks. [online] Investopedia. Available at: https://www.investopedia.com/articles/financial-theory/09/risk-management-business.asp [Accessed 9 Dec. 2021].

Hanson, W.A. and Kalyanam, K. (1994). Risk Management: A Cost-Plus Trap: Pricing Heuristics and Demand Identification. Marketing Letters, [online] 5(3), pp.199–209. Available at: https://www.jstor.org/stable/40216340 [Accessed 9 Dec. 2021].

Johansen, A.M. (2010). Monte Carlo Methods. International Encyclopedia of Education, [online] 4(2), pp.296–303. Available at: https://doi.org/10.1016/B978-0-08-044894-7.01543-8 [Accessed 9 Dec. 2021].

Kosutic, D. (2016). ISO 27001 risk treatment: Explanation of 4 mitigation options. [online] 27001Academy. Available at: https://advisera.com/27001academy/blog/2016/05/16/4-mitigation-options-risk-treatment-according-iso-27001/ [Accessed 9 Dec. 2021].

Wells, G. (1997). Hazard Identification and Risk Assessment. 7th ed. [online] Google Books, IChemE, pp.7–15. Available at: https://books.google.co.in/books?hl=en&lr=&id=BScCJJshJmcC&oi=fnd&pg=PR3&dq=%E2%80%A2+Identification+of+Risk:&ots=8wGKfQTNDU&sig=lj8zn5_06lc6Nf7_LT75X2mKOhU#v=onepage&q=%E2%80%A2%20Identification%20of%20Risk%3A&f=false [Accessed 9 Dec. 2021].

Zhang, Z. and Chu, X. (2011). Risk prioritization in failure mode and effects analysis under uncertainty. Expert Systems with Applications, [online] 38(1), pp.206–214. Available at: https://doi.org/10.1016/j.eswa.2010.06.046 [Accessed 9 Dec. 2021].

………………………………………………………………………………………………………………………..

Know more about UniqueSubmission’s other writing services:

Assignment Writing Help

Essay Writing Help

Dissertation Writing Help

Case Studies Writing Help

MYOB Perdisco Assignment Help

Presentation Assignment Help

Proofreading & Editing Help