Procurement Risk and Contract Management

Procurement Risk and Contract Management Assignment Sample

Introduction

Risk management refers to the task of assessing, recognizing, and managing threats related to a firm’s earnings and capital. On the other hand, procurement risk is related to the “potential for failures of a procurement process designed to purchase resources, products, or services” (Dixit, 2020).http://Procurement Risk and Contract Management The undertaken project is on the construction of the Yang Sing hotel and this study focuses on the risk assessment of the Yang Sing Hotel Project and methods used to combat it. Moreover, the risk matrix helps build a proper risk management plan to avoid risks in the future and enhance the sustainable success of this project.

a. Identification of the risks

Risk assessment helps save money for an organization. It minimizes the chances of injustice in the workplace. It helps in protecting the important resources of the firm (Abrhám and Lžičař, 2018).http://Procurement Risk and Contract Management

Lack of strategic corporate planning: The Yang Sing hotel is an old hotel. The threat to this hotel relates to a lack of strategic corporate planning. Strategic risk management should be done to avoid risks related to legal matters. The planning process also states “why those goals are vital” (Argenti, 2018).http://Procurement Risk and Contract Management

Extensive dependency on old technologies: As Yang Sing hotel is based on old construction planning, customers would prefer hotels with modern infrastructure having all the modern facilities available to them with the click of a button. This can add to the various risks arising due to the lack of modern amenities (Buhalis and Cheng, 2020).http://Procurement Risk and Contract Management

Issues in the executive management: The executive management of Yang Sing hotel should properly plan the “deals for visiting customers” and customers should not have to wait for amazing deals like 50% off on hotel rooms (Sztorc, 2020).http://Procurement Risk and Contract Management

Data breach: Data privacy policies should be well maintained by the hotel management in the Yang Sing project. A leak of important information regarding the hotel work processes can prove fatal. This may make other rivals copy it and use it for their own need (Antónioet al. 2017).http://Procurement Risk and Contract Management

Inefficient staff recruitment: Recruitment of proper and efficient staff is very important for hotel projects like that of Yang Sing. Shortage of experienced staff may be a big issue. Inefficient and incorrect performance of staff may cause capital loss. The use of green human resource management can ease this problem (Gohar et al. 2019).http://Procurement Risk and Contract Management

Inappropriate behavior of guests: The behavior of guests at the Yang Sing hotel project may be tackled properly through proper and timely customer care service. Each floor would have a floor manager as planned. Uncleaned rooms, rude staff, uncomfortable environment, and bad taste of food would cause arriving guests to react in a bad manner. Staff performance risk should be analyzed in rooms (Sztorc, 2020).http://Procurement Risk and Contract Management

Quality risk: The future scope of the project is analyzed which would increase the quality of the output. The performance of the staff members should be scrutinized throughout the process of work and continuous feedback should be given on how to improve (Espino-Rodríguez and Ramírez-Fierro, 2018).http://Procurement Risk and Contract Management

Continuous change of client demands: For the Yang Sing hotel project, the demands of the customers may keep on changing with time. This should be met by the hotel staff to increase and keep up to their brand name. The real challenge is when the hotel staff can respond to the varied customer needs on time (Gohar et al. 2019).http://Procurement Risk and Contract Management

High competition: Risks may arise while serving customers in this competitive world. This project plan for Yang Sing hotel should incorporate all modern tools and techniques and try to avoid market risks. Strategic plans may enable timely project completion without much rivalry from other hotels in this industry (Gohar et al. 2019).http://Procurement Risk and Contract Management

Cost risks: The Yang Sing project should try to avoid risks related to the cost as it would hamper profit percentage and increase the cost. Cost management is essential which in turn helps prevent legal risks in the future (Chen, 2019). http://Procurement Risk and Contract ManagementSharing economy is another risk that should be tackled.

Justification for picking these risks

Lack of strategic corporate planning relates to failure in alignment and deficiency of fearless leadership. The reason for choosing this risk is to recognize the lack in the planning process and incorporate fresh strategies to minimize risks and increase sustainable success. Extensive dependence on old technologies can defer timely delivery. Performance risk can be avoided by choosing to amend and inculcate modern things to attract customers from all over the world (Dixit, 2020).http://Procurement Risk and Contract ManagementIssues in executive management help in tackling crisis management. A lack of strategies can increase risks in the project. Quality risk ensures a good decision-making process. This enhances the performance of the staff, increases the scope for sustainable success, and helps tackle technological risks easily (Espino-Rodríguez and Ramírez-Fierro, 2018).http://Procurement Risk and Contract Management Continuous change in client demands causes inevitable risks. Projects should cope with customer needs.

b. The likelihood and impact of each risk

Risks Likelihood Impact Risk score (likelihood * impact) Mitigation action
Lack of strategic corporate planning Medium 2 Medium 2 4 Risk management plans should be built along with proper execution plans to tackle the lack of strategic corporate planning.
Extensive dependency on old technologies Low 1 Low 1 1 New software,  tools, and technologies, on par with the contemporary world, can be implemented to attract customers to the hotel. Surveying the outside environment can help in project enhancement through the gain of knowledge and understanding.
Issues in the executive management Low 1 Low 1 1 Proper risk management strategies can help in tackling regulatory issues. Active support from seniors can help tackle uncertainty.
Data breach High 3 High 3 9 The key action that can be taken to lessen the effect is by creating a faculty that provides a particular amount of information that may not be so harmful if leaked.
Inefficient staff recruitment High 3 High 3 9 Must haves should be included in the job profile. Communication should be open. Current employees should be leaned upon for help.
Inappropriate behavior of guests Medium 2 Medium 2 4 Operational risks regarding the behavior of guests can be tackled by meeting the needs of the people and improving customer service programs.
Quality risk High 3 High 3 9 A collaborative approach is essential for quantifying, recognizing, and reducing operational and supply chain risks.
Continuous change of client demands Medium 2 Medium 2 4 Client needs should be understood. Controlling continuous change requires proper understanding and powerful leadership.
Competition from rivals High 1 High 1 1 Research on the surrounding environment can be productive for tackling market risks. Customer demands can be fulfilled by listening to feedback and being honest.
Cost risks High 1 High 1 1 Adding margin to the price of subcontractors can help tackle cost risks. Budget control and management should be done from the start of the project.

 

 

Table 1: likelihood and impact of risk

(Source: Created by author)

Risk Cost Benefits
Lack of strategic corporate planning 8 5
Extensive dependency on old technologies 3 1
Issues in the executive management 5 6
Data breach 2 3
Quality risk 7 7
Inefficient staff recruitment 8 8
Inappropriate behavior of guests 2 3
Continuous change in client demands 9 5
Competition from rivals 5 4
Cost risks 5 5

 

It is considered that cost of each factor is numbered out of 10. Increased numbers cost denote that that particular risk has excessive effects over its benefits. An increased number of benefits denotes that the benefits from each risk need more impact in this project management. It is found in the project management sources regarding risk registers and matrices (Pmi.org, 2020).http://Procurement Risk and Contract Management

c. Risk matrix

The risk assessment requires determining the severity or degree of risks and likely chances of affecting the project. The impact levels over the project, the risk matrix the weights of the likely probabilities against the implications of risk over the project’s success (Biswas and Zaman, 2019).http://Procurement Risk and Contract Management

Types of severe and impactful risks 

  1. Absence of strategic corporate planning
  2. Higher usage of outdated technologies and techniques consideration
  3. Issues in management practices
  4. Possibility of a data breach
  5. Lack of support and failure due to ineffective team

 

Hazard analysis and risk assessment matrix
HAZARD SEVERITY
Risks Hazard likelihood Insignificant Minor Moderate Major Catastrophic
1. Very likely Low Medium High Extreme Extreme
2. Possible Moderate Low Moderate Extreme High
3. Likely High Medium Medium High High
4. Unlikely Low Low Moderate Low High
5. Highly likely High Moderate High Low High

Table 1: Risk matrix of likely risks affecting the project

Source: (Self-created)


Procurement Risk and Contract Management
Figure 1: Risk diagram

Source: (Self-created)

The above risk assessment matrix table shows the likely risk tendency to affect the project at different levels. Project risk assessment is an effective continuous process and important to bring the required changes concurrently with new modifications or mitigation strategies in the organization (Hungr, 2018). http://Procurement Risk and Contract ManagementThe Yang Sing Hotel Project can review the determined risks in sections to better formulate mitigation strategies. Below the determining risk is grouped based on the severity in detail:

Critical

These are the risks that need prompt resources, proactive or preventive measures, and quick action consideration. They are prioritized as higher due to their negative implications on the feasibility of the project. As per the above table, it is determined that the most critical risks are the absence of strategic corporate planning (Yazdi et al. 2019).http://Procurement Risk and Contract Management This risk is higher as business owners and managers lack the capability to predict the likely risks and prepare for it can highly damage the undertaken initiatives and desired outcomes.

Major risks

These are determined as high risks, but the implications are at comparatively lower compared to the extreme designation of probability with a higher severity degree. Within the determined risks the major risks are higher usage or outdated approaches, techniques, and technologies along with the possibility of a data breach (Pilić et al. 2019).http://Procurement Risk and Contract Management These aspects can delay the project; affect project objectives acquisition, scope consideration and meeting the deadlines as a result. Further, the possibility of a data breach can cause legal obligations in the project. This risk can surround the Yang Sing Hotel Project with negative consequences and damage the reputation before it is introduced within the marketplace.

Moderate risks

These risks are classified as issues that have the tendency to prevail over mid-level risks. The likely issues within the management in handling the project requirements can delay the project (Sakurahara et al. 2020). http://Procurement Risk and Contract ManagementFurther, this risk can disrupt the degree of support required by the project ultimately damaging the project quality assurance.

Minor risks

These risks have lower weight in comparison to other options, in this case, it is evident that lower risk is perceived as a lack of support from the management team. This risk has the tendency to be resolved by manager supervision (Halappanavar et al. 2020).http://Procurement Risk and Contract Management

d. Risk action plan

 

Risk action plan
Item 1.
Risks Absence of strategic corporate planning

 

Summary The lack of strategic planning can affect the project scope, goals, objectives, and planning phase with an unfocused vision, mission, and practices considered by the management team. This can affect the decision-making and options section in supporting the project’s timely and quality completion (Basu et al. 2017).http://Procurement Risk and Contract Management
Proposed actions ●      Effective planning by using project management software and methodologies.

●      Realistic milestones and objectives can be formulated to ensure the team is operating on the right path.

●      Tracking and monitoring the operations and tasks after satisfaction moving to the next phase.

Resource requirements ●      Project management software

●      Project manager supervision

●      Project management tools

●      Flow of communication

●      Suitable project methodology

Responsibilities The project manager of the Yang Sing Hotel Project will be in charge to check that the entire initiation and planning stage is conducted effectively with a clear starting and completion date with a set of objectives.
Timing 2 weeks
Reporting/monitoring The reporting and monitoring will be controlled by the project manager to track everything and predict the likely changes that need to be induced.

Table 2: Mitigation Strategy for strategic planning risk

Source: (self-created)

 

Risk action plan
Item 2.
Risks Higher usage of outdated technologies and techniques consideration
Summary The dependency on outdated technologies can cause the recurring scope of continuing mistakes and human errors. Further, the technologies and techniques will not be reliable to provide the required support to the project (Stevenson, 2018).http://Procurement Risk and Contract Management
Proposed actions The advanced technology consideration will allow reorganizing the project with a better scope of development. This can increase the chances of synchronicity, being intuitive and easily adaptable to better support the project requirements.
Resource requirements ●      Collaboration tools

●      Project tracking tools

●      Information gathering tools

●      Scheduling software

●      Workflow automation

Responsibilities The project manager will be responsible to guide the management team to use the advanced tools to conduct the operations.
Timing Until the project ends 1 year
Reporting/monitoring Project manager and business owner

Table 3: Mitigation strategy for risk of outdated technology use

Source: (self-created)

 

Risk action plan
Item 3.
Risks Issues in management practices
Summary The prevailing constant issues from the management sides can cause delays in the project completion as result. It can further damage the quality of the project through constant human errors and mistakes.
Proposed actions Higher consideration is required to check the task completion and meeting the objectives or not effectively (Zio, 2018).http://Procurement Risk and Contract Management
Resource requirements ●      Formulation of checklist

● Cloud-based management software

●      Securing a constant flow of communication in management levels

Responsibilities The management team along with the project manager will be responsible to lower the degree of mistakes with the daop[tion of proposed actions.
Timing 6 months
Reporting/monitoring Project manager

Table 4: Mitigation strategy for risk of issues in management practices

Source: (self-created)

 

Risk action plan
Item 4.
Risks Possibility of a data breach

 

Summary The possibility of losing crucial information or data breach can cause legal obligations and damage the reputation of the Yang sing Hotel project.
Proposed actions The actions that can be useful for the company include limiting the access of employees. Further enabling security facilities to prohibit the leakage of data.
Resource requirements ●      Restraining access of the employees

●      Enhancing security with passwords features on the system

Responsibilities The developer, project manager, and management team are responsible for not causing any data breach to avoid any legal issues in the business or involved stakeholders.
Timing 3 months
Reporting/monitoring Project manager

Table 6: Mitigation strategy for risk of the possibility of a data breach

Source: (self-created)

Risk action plan
Item 5.
Risks Lack of support and failure due to ineffective team

 

Summary The lack of support can lead to recurring issues in meeting the project deliverables, milestones, and quality constraints.
Proposed actions The actions that can be taken into consideration are the use of technologies and training for the management team to conduct the operations with accuracy (Miciula, 2020).http://Procurement Risk and Contract Management
Resource requirements ●      Technologies

●      Manager supervision

●      Training and development facilities

●      Flow of communication

Responsibilities The involved stakeholders, management team, and project manager will be responsible
Timing Until the project finishes, 1 year is required
Reporting/monitoring The project manager will conduct the reporting and monitoring activities to ensure the proper completion of work.

Table 7: Mitigation strategy for risk of lack of support and failure due to ineffective team

Source: (self-created)

Risk action plan
Item 6.
Risks Inappropriate behavior of guests
Summary Threatening guests can hamper the brand image of an organization. The communication gap between the hotel staff and customers can result in customer dissatisfaction.
Proposed actions Some rules and regulations should be set by the management of the hotel. Customers should know the limitations and act accordingly.
Resource requirements ●      Educating the staff

●      Strong leader

●      Open communication flow

●      Enforcing policies consistently

Responsibilities The staff members, the lead project manager, and clients will be responsible.
Timing Until the project ends, 1 year is required
Reporting/monitoring Project manager and business owner. The staff may report to them.

 

Table 8: Mitigation strategy for risk of inappropriate behavior of guests

(Source: self-created)

 

Risk action plan
Item 7.
Risks Quality risk
Summary Quality risk management is an organized process for controlling, communicating, assessing, and reviewing the quality of the risk involved. This can risk the brand image.
Proposed actions The measures that can be productive for the firm relates to proper risk management processes. This comprises recognition of risks, investigation, and evaluation that aid in proper decision-making.
Resource requirements ●      Production quality analysis

●      Marketing strategies

●      Supervision

Responsibilities The quality analyst, project manager, and management team are responsible to ensure good quality.
Timing 1 month
Reporting/monitoring Quality analysts and Project managers can report and monitor this process.

Table 9: Mitigation strategy for quality risk

Source: self-created)

Risk action plan
Item 8.
Risks Risks related to the continuous change in client demands
Summary The continuous change in customer demands creates challenges for executives and project managers (Yazdi et al. 2019).http://Procurement Risk and Contract Management Satisfying clients and keeping up with the continuous change in customer demands in a good competitive environment is important.
Proposed actions Figuring out what customers exactly want is important. Making products and services keeping in mind their wants is essential as brand image depends on their feedback. Incorporating creativity is important.
Resource requirements ●      Surveying the market

●      Listening to customer choices and needs

●      Incorporating client needs

Responsibilities The management team along with the project manager will be responsible. Researchers can help survey. The customer service department staff controls it.
Timing Until the project ends, 1 year is required
Reporting/monitoring The project manager monitors and customer service staff reports.

Table 10: Mitigation strategy for risk of continuous change in client demands

(Source: self-created)

 

Risk action plan
Item 9.
Risks Risk of high competition from rivals
Summary The competitive intensity is affected by new entrances. Managing competition through strategic planning is important.
Proposed actions The market should be analyzed properly. Innovation should be brought in.
Resource requirements ●      Collaboration tools

●      Project tracking tools

●      Information gathering tools

●      Workflow automation

Responsibilities The project manager will be responsible to guide the management team to survey the market and try to bring in innovations.
Timing Until the project ends 1 year
Reporting/monitoring Project manager and business owner

Table 11: Mitigation strategy for risk of high competition from rivals

(Source: self-created)

 

 

Risk action plan
Item 10.
Risks Cost risks
Summary The cost of risk management relates to the adjustment of loss expenses. Moreover, tackling risk control costs is important.
Proposed actions Identification of risks related to cost is important. Analysis of expenditure is important. Cost risk analysis helps in the elimination of uncertainties
Resource requirements ●      Collaboration tools

●      Project tracking tools

●      Information gathering tools

●      Scheduling software

●      Workflow automation

Responsibilities The project manager will be responsible to guide the management team to use the advanced tools to conduct the operations related to cost management.
Timing Until the project ends 1 year
Reporting/monitoring Project manager and business owner

Table 12: Mitigation strategy for cost-related risks

(Source: self-created)

Conclusion

The conducted study has highlighted the importance of risk management within the project. The case scenario of the Yang Sing Hotel Project is reflected in the conducted study to better understand the effectiveness of risk management. It is determined that despite the availability of enhanced resources, technologies, modified techniques, project management tools, flexible methodologies, and training materials projects tend to suffer. Risk management is an effective technique to anticipate the likely risks that can damage the desired results.

 

 

References

Abrhám, J. and Lžičař, P., 2018. RISK MANAGEMENT IN THE SUSTAINABLE DEVELOPMENT: ANALYSIS OF A SELECTED KEY INDUSTRY. Journal of Security & Sustainability Issues8(2).

António, N., de Almeida, A. and Nunes, L.M., 2017. Using data science to predict hotel booking cancellations. In Handbook of research on holistic optimization techniques in the hospitality, tourism, and travel industry (pp. 141-167). IGI Global.

Argenti, J., 2018. Practical corporate planning. Routledge.

Basu, S., Sengupta, A. and Mazumdar, C., 2017, April. A Quantitative Methodology for Cloud Security Risk Assessment. In CLOSER (pp. 92-103).

Biswas, T.K. and Zaman, K., 2019. A fuzzy-based risk assessment methodology for construction projects under epistemic uncertainty. International Journal of Fuzzy Systems, 21(4), pp.1221-1240.

Buhalis, D. and Cheng, E.S.Y., 2020. Exploring the use of chatbots in hotels: technology providers’ perspective. In Information and Communication Technologies in Tourism 2020 (pp. 231-242). Springer, Cham.

Chen, L.F., 2019. Hotel chain affiliation as an environmental performance strategy for luxury hotels. International Journal of Hospitality Management77, pp.1-6.

Dixit, V., 2020. Risk assessment of different sourcing contract scenarios in project procurement. International Journal of Construction Management, pp.1-13.

Espino-Rodríguez, T.F. and Ramírez-Fierro, J.C., 2018. Outsourcing performance in hotels: evaluating partnership quality. Sustainability10(8), p.2766.

Halappanavar, S., Ede, J.D., Mahapatra, I., Krug, H.F., Kuempel, E.D., Lynch, I., Vandebriel, R.J. and Shatkin, J.A., 2020. A methodology for developing key events to advance nanomaterial-relevant adverse outcome pathways to inform risk assessment. Nanotoxicology, pp.1-24.

Hungr, O., 2018. A review of landslide hazard and risk assessment methodology. Landslides and engineered slopes. Experience, theory and practice, edited by: Aversa, S., Cascini, L., Picarelli, L., and Scavia, C., CRC Press, Boca Raton, FL, pp.3-27.

Miciula, I., 2020. Risk Assessment Methodology in Public Financial Institutions. Chapters.

Pilić, V., Mihajlović, V., Baloš, D., Anđelković, A. and Stanojević, P., 2019. Application of innovative risk assessment methodology for damage mechanisms identification on part of amine regeneration unit. Structural Integrity and Life, 19(1), pp.29-35.

Pmi.org 2020, PMI.org Available at: https://www.pmi.org/learning/library/mistakes-made-managing-project-risks-6239 [Accessed on 13 February 2021]

Pmi.org 2020, PMI.org Available at: https://www.pmi.org/learning/library/risk-analysis-project-management-7070 [Accessed on 13 February 2021]

Sakurahara, T., Reihani, S., Kee, E. and Mohaghegh, Z., 2020. Global importance measure methodology for integrated probabilistic risk assessment. Proceedings of the Institution of Mechanical Engineers, Part O: Journal of Risk and Reliability, 234(2), pp.377-396.

Stevenson, M., 2018. Assessing risk assessment in action. Minn. L. Rev., 103, p.303.

Sztorc, M., 2020. Lean management as a method for improving selected processes at hotels.

Yazdi, M., Hafezi, P. and Abbassi, R., 2019. A methodology for enhancing the reliability of expert system applications in probabilistic risk assessment. Journal of Loss Prevention in the Process Industries, 58, pp.51-59.

Zio, E., 2018. The future of risk assessment. Reliability Engineering & System Safety, 177, pp.176-190.

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