Research the literature for practices and methodologies appropriate for managing risk in simple to complex projects in a global environment. Find examples of the benefits and failures of risk management and the impact on the organization. Based on either your research or a personal experience:
Provide an example of risk management failure and explain how that failure impacted the organization.
Discuss how proper risk management strategies could have prevented this situation.
Suggest an improved approach to planning and managing project risk by addressing opportunities, threats, uncertainty, and ambiguity.
Provide a positive example of risk management that worked, analyzing strengths and weaknesses of the current practices, to defend your answers.
Full Answer Section
Impact on the Organization:
- Financial Loss: Theranos' investors lost billions of dollars.
- Reputational Damage: The company faced public scrutiny and legal repercussions.
- Loss of Trust: The failure eroded public confidence in the healthcare innovation space.
How Proper Risk Management Could Have Prevented This:
- Thorough Risk Identification: Theranos should have identified technical risks associated with their unproven technology.
- Realistic Project Planning: Setting unrealistic timelines and overpromising on capabilities led to failure.
- Risk Mitigation Strategies: Failing to develop backup plans or alternative testing methods amplified the consequences.
Improved Approach to Risk Management:
- Opportunity & Threat Analysis: Systematically identify and evaluate both positive and negative potential outcomes.
- Uncertainty & Ambiguity Management: Develop strategies to address situations where information is limited and outcomes are unclear.
- Contingency Planning: Create well-defined backup plans for identified risks to minimize impact.
- Continuous Monitoring & Adaptation: Regularly assess project progress and adjust risk management strategies as needed.
Positive Risk Management Example:
The successful development of the Airbus A350 XWB aircraft serves as a positive example. Airbus proactively identified potential risks associated with this new wide-body aircraft, including:
- Supply Chain Delays: Airbus built strong partnerships with suppliers and implemented buffer stock strategies.
- Technical Challenges: Extensive testing and simulations were conducted to mitigate unforeseen technical issues.
- Market Fluctuations: Airbus diversified its customer base and offered flexible delivery schedules.
Strengths and Weaknesses of Current Practices:
- Strengths: Formal risk management processes encourage planning and proactive identification of potential issues.
- Weaknesses: Overly complex methodologies might cause delays and discourage project initiation.
Improved Approach for A350 Example:
- Agile Risk Management: Adapting risk management strategies as the project progresses to address emerging challenges.
- Data-Driven Decision Making: Utilizing data analytics to quantify risks and prioritize mitigation efforts.
- Collaborative Risk Management: Encouraging open communication and involving stakeholders in risk identification and mitigation.
In conclusion, effective risk management is crucial for project success in a global environment. By actively identifying opportunities, threats, uncertainties, and ambiguities, organizations can develop comprehensive strategies to navigate challenges and optimize project outcomes. Proactive risk management fosters a culture of preparedness and resilience, leading to improved project success rates and minimizing potential financial losses and reputational damage.
Sample Answer
Risk Management: Failures, Successes, and Improved Approaches
Risk Management Failure Example:
The launch of Theranos' blood testing technology serves as a stark example of risk management failure. Theranos promised revolutionary blood tests requiring minimal blood samples, attracting significant investment and media attention. However, the technology never functioned as promised.