Risk Management Strategies for Supplier Global Expansion- A Case Study

Risk Management Strategies for Supplier Global Expansion- A Case Study

Introduction

Risk management is an important activity that helps in promoting the success of a project. It includes identifying, assessing, and prioritizing risks and coordination and economical application of resources to reduce, monitor, and control the probability and impact of risk. In every business environment, risks are inevitable because they arise from different sources, such as natural causes, legal liabilities, financial markets, and deliberate attacks from market rivals. It is, therefore, important for every organization to have a well-established risk management plan. This paper reviews various concepts of risk management by considering Amazon Company’s project to expand to a new global market.

Describe the objectives and goals, tools and techniques, and organizational roles and responsibilities for effective risk management for the project

One of the objectives and goals of effective risk management for the project is to provide effective balancing of the costs that will be incurred in different market entry activities such as marketing and payment of government fees and performance goals within the funding of the project. The company will have to conduct a thorough risk assessment of all aspects of the project and come up with appropriate mitigations to avoid project failure. The second goal is to ensure that risk management is consistent with and supports the achievement of the company’s corporate and strategic objectives (J. Kikwasi, 2018). In this case, risk management will focus on creating a conducive business environment for expansion to the new market by eliminating risks that may hinder success in acquiring a reasonable customer base. The third objective is providing high-quality services to customers by eliminating and mitigating risks that affect the company’s ability to provide high-quality services. The fourth objective is to meet legal and statutory obligations. Expanding operations to a new market requires having a clear understanding of legal and statutory obligations that may affect the business and any risks arising from these obligations. It is therefore important for Amazon company to conduct research on these obligations and how they may affect the company’s strategic objectives. The main goal of effective risk management for the project is to minimize financial risks (J. Kikwasi, 2018). Venturing into a new market could expose the company to various financial risks that can be mitigated if the company is aware of them, hence minimizing the negative impacts of financial losses. The second goal is minimizing the risks associated with operating in a new business environment (J. Kikwasi, 2018). The project consists of expanding operations to a new market that the company officials may not have a proper understanding of hence creating risks arising from market uncertainties. It is therefore important to apply risk management in identifying potential risks and coming up with strategies to mitigate the risks when they occur.

One of the tools and techniques that will be used for effective risk management for the project is brainstorming. This technique includes discussing with the project team and project manager to identify risks that could occur in the project and strategies that can be used to eliminate the risks or reduce the impact they may have on the project (Schuler, 2015). One of the steps involved in brainstorming is reviewing all the documentation of the project. The second step is overseeing all historical information and data about risks from previous projects similar to the one being handled at the moment. The third step is reading over articles that discuss the risks involved in the project to get an idea of how to handle them when they occur. The project team can also engage project stakeholders with experience in handling risk in similar projects to get the information required for effective risk preparedness. The second tool and technique is the root cause analysis. This technique is used to identify risks connected to a project and determine the responsiveness of the project team members in risk management. It identifies the main cause of a problem to help the project team apply the right measures to resolve it (Chapman, 2011). The third tool and technique is a SWOT analysis. This technique focuses on identifying risk by analyzing strengths, weaknesses, opportunities, and threats. Risk is, however, mainly identified by reviewing weaknesses and threats (Chapman, 2011). The third tool and technique is the probability and impact matrix. This technique is used to prioritize risk based on how it impacts the project. It combines probability and impact scores of every risk in the project and then runs the risks based on their seriousness.

There are various organizational roles and responsibilities that will be considered for effective risk management for the project. One of them is to gather data and conduct investigations to determine risks that the company may face in the implementation of the project. This will include using key risk indicators and what-if analyses aimed at determining concerns on whether the identified risks will occur. The main concerns will be financial loss and damaging the reputation of the company. The second set of roles and responsibilities will include implementing action plans and control systems to protect the company’s resources and assets. This will be achieved by mitigating risks and any potential damage arising from the occurrence of a risk. Other roles and responsibilities will be designing business continuity plans, defining crisis management, updating company procedures correlating to current business practices, and introducing operational procedures.

Describe various information sources that may be used by the project team for risk identification

One of the information sources that may be used by the project team for risk identification is historical information from presented by other companies that have been operating in the market the company intends to join. Such information will offer insight on operational risks and challenges, thus preparing the company on how to address them when they occur. The second source is reports provided by other companies on the nature of the marketplace. Such information can be found in other companies’ SWOT and PESTEL analyses, which are in most cases available online. This will provide the company with an overview of marketplace risks that cannot be directly controlled for effective management and mitigation. Such risks include the risk that consumer demand may reduce, hence creating less demand for the company’s products or the risk that another company may introduce a better version of what the company is offering, hence intensifying competition and making Amazon company’s services less desirable. Other similar risks may occur due to changes in the prices of similar services offered by competitors. Lowering prices may create financial loss due to the loss of customers. The third source of information is financial reports. These reports can help identify risks by reviewing cash flow. Amazon company may predict changes in cash flow based on the profit being generated.

Identify and describe the risk management documentation that will be required for the project. Examples include RMP and risk management log or register

The first risk management documentation that will be required for the project is the risk register. A risk register is a document containing information about identified risks, risk response strategies, and results of risk analysis, mainly impact, and probability. The document contains 12 elements (Rakos et al., 2015). The first element is the risk category, which categorizes risk based on whether it affects cost, scope, resources, and time and whether it relates to the business environment. The second element is risk description, which provides general information about risk. The third element is risk ID which is a unique identification number used in identifying and tracking risks in a risk register. The fourth element is project impact, which describes how risk affects the project. The fifth element is the likelihood, which reviews the probability that a risk will occur and create a challenge in the project. The sixth element is consequences, which are the impacts of a risk on the project. The seventh element is risk run, which is the magnitude of a risk. The eighth element is risk trigger, which reviews the cause of a risk. The ninth element is the prevention plan, which is the plan implemented to prevent the occurrence of a risk. The tenth element is the contingency plan, which is the action plan that is considered if a risk occurs. The eleventh element is the risk owner, which is the person responsible for the implementation of the risk management plan. The final element is a residual risk which is the risk that remains after elimination or mitigation of a risk.

The second risk management documentation will be a risk management plan which is a written document detailing the risk management process that will be used. The project will also use risk reports to communicate the status or progress of the risk management plan. The report will also provide information on emerging risks and how they will be addressed (Rakos et al., 2015). Other important documentation that will be used are the mitigation and contingency plans. These two documents will outline processes, policies, and procedures for unexpected risk. The mitigation plan will be used before a risk occurs, while the contingency plan will be used after a risk occurs.

Explain the role of risk management in the project planning process.

According to Dalcher (2012), the main objective of using risk management is to enhance organizational value. This is achieved by eliminating and preventing any risks that could affect organizational productivity and performance. Pre-planning risk management also helps in moderating the relationship between project success and project planning. Effective risk management techniques play a significant role in identifying a project’s opportunities, strengths, weaknesses, and threats hence guiding the project team on how to proceed with the project based on the ability to eliminate weaknesses and deal with threats. The project team can also plan for unexpected events and be ready to address any issue that arises in the planning process. Risk management also enhances project success by helping the project team identify both external and internal risks, the probability of their occurrence, proposed actions, and the potential impact of various risks. Another major role of risk management in the project planning process is helping the project team determine all the resources required to successfully complete the project. The project planning process includes setting aside project resources. In some instances, risk may affect resources such as finances needed to complete the project. It is, therefore, important to identify the probability of such risks occurring so that the project team can set aside some resources that will be used to save the project when a risk occurs. This plays a significant impact in maximizing project results and meeting deadlines because the likelihood of delays arising from project risks is eliminated.

Risk Breakdown Structure

Level 0	Level 1	Level 2	Level 3
Project Risk	Environment	Statutory	Planning approval delays
			Changes in legislation (e.g., Financial regulation legislation limiting the availability of funds among customers hence reducing purchases)
	Industry	Market	Change in customer preference
			Change in demand
			Increase in competition
		Quality	Availability of high-quality substitutes
	Technical	Engagement	Limited engagement between customers and Amazon app support
		Complexity	Failure to understand how to navigate the Amazon app
		Technology	Limited access to the internet
	Organizational	Staffing quality	Poor project management skills
		Project dependencies	Misinterpretation of project dependencies
		Decision making	Lack of participation of all project team members in decision-making
			Conflicts among team members
		Suppliers	Contract relationships with customers and suppliers
		Executive support	Lack of communication between top management and the project team
			Pressure to complete the project within a short time
			Differences in the interests of the executive members
		Funding	Mismanagement of funds Late provision of required funds Availability of funds does not meet cash flow forecasts
		Prioritization	Poor task scheduling Assumption of important tasks
		Project resources	Late provision of project resources Mismanagement of project resources Project resources failing to adequately meet project needs (e.g., unqualified project team members)
	Project Management	Cost estimates	Overestimates and underestimate
		Schedules	Poor scheduling (setting aside too much time to complete a task or less time) Exempting important tasks in the project schedule
		Communication	Miscommunication Lack of communication among the project team Use of wrong channels of communication (e.g., using a channel that cannot be accessed by all project team members)
		Team management	Poor definition of project team responsibilities Poor balance of expertise and resources Poor conflict management Inadequate project management controls Changes within the project were not communicated properly Absenteeism Lack of clarity on project deadline and requirements Conflicts of interest among team members

References

Chapman, R. J. (2011). Simple tools and techniques for enterprise risk management. John Wiley & Sons.

Dalcher, D. (2012). Book review: Project management for the creation of organizational value. Project Management Journal, 43(3), 79-79. https://doi.org/10.1002/pmj.21269

10. Kikwasi, G. (2018). Critical success factors for effective risk management. Risk Management Treatise for Engineering Practitioners. https://doi.org/10.5772/intechopen.74419

Rakos, J., Dhanraj, K., Kennedy, S., Fleck, L., Jackson, S., & Harris, J. (2015). The practical guide to project management documentation. John Wiley & Sons.

Schuler, R. S. (2015). Brainstorming. Wiley Encyclopedia of Management, 1-1. https://doi.org/10.1002/

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Assignment Content

Risk involves uncertainty, the lack of knowledge of future events, and the measures of profitability and consequences of not achieving the project goal. Your organization has decided that to be successful in the global economy, it must expand its supply base into China or another country approved by your faculty member. This has become a strategic project for the organization.

Select an organization with which you are familiar as the basis of the paper.

Write a 1,400- to 1,750-word paper in which you address the following risk management items for this supplier global expansion project:

Describe the objectives and goals, tools and techniques, and organizational roles and responsibilities for effective risk management for the project.
Describe various information sources that may be used by the project team for risk identification.
Identify and describe the risk management documentation that will be required for the project. Examples include RMP and risk management logs or registers.
Explain the role of risk management in the project planning process.

Create a risk breakdown structure that outlines the organization’s risk categories.