Summarize the following 2. Risk management and project success in IT projects 2.

Question

Summarize the following

2. Risk management and project success in IT projects

2.1. How risk management is approached

For quite some time now, researchers have had a com- mon interest in the area of risk and uncertainty in IT pro- jects. Early publications include e.g. Alter and Ginzberg(1978), Zmud (1980) and McFarlan (1981), later followed by Boehm (1991), Barki et al. (1993), Charette (1996) and Lyytinen et al. (1996). These authors consider risk manage- ment primarily an ex-post evaluation process. The aim of such a process is to list and quantify the risks and find the causes for software project failure. This information is then used in the next project in order to prevent these risks from occurring. Fig. 1 presents this process graphi- cally, showing that:

known risk factors are the input for a project;the project risk management process collects informa- tion about the risks and failure of the project, whichleads to new risk factors;these new factors are added to the list of known risk fac-tors, together forming the input for the next project.In the remainder of the paper, this approach is referred to as the evaluation approach. This approach aims at answering the question what causes projects to fail. This approach assumes that by knowing the risks and their causes they can and will be managed, which is likely to lead to a positive effect on the project outcomes. The aim is to create project predictability in a new project by using the information regarding the risks and causes of project fail- ure gathered in previous projects. The underpinning assumption is that projects are comparable in the sense that information about risks can be generalised and is used in future projects.

In his paper, Boehm (1991) discusses a list of risks in soft- ware projects, as a result of which the paper can be posi- tioned as belonging the evaluation approach. But in the same paper, Boehm describes risk management as a process consisting of identifying, analysing, controlling, and moni- toring events that may jeopardise a software project. Risk management then becomes a sequence of activities with the aim to gather information about situations that may or may not occur in a specific project (Chapman and Ward, 1997; Pich et al., 2002). The sequence of activities that char- acterises project risk management is described in detail by e.g. Del Can o and Pilar de la Cruz (2002). This sequence of activities is executed during the project with the aim to support and improve the project’s management by deter- mining which actions should be taken. Fig. 2 presents a graphical representation of this approach. In the remainder of this paper, this will be referred to as the management approach of risk management. This approach aims at answering the question how to deal with risks in order to prevent a project from failing. In the context of projects and project success, the assumption is that better informa- tion leads to better estimates of the amount of time and money needed to complete the project, and that better information leads to a better insight into what should be delivered by the project (Chapman and Ward, 1997). By improving the project planning, budget and design, project risk management is assumed to contribute to the success of the project.

To summarise, there are two approaches in the literature that describe risk management in projects: the evaluation approach and the management approach. The evaluation approach considers risk management as an analysis process aimed at determining risk factors. Information about pro- ject failure and its causes is collected ex-post and ideally this information is used in checklists for risk identification, or to set up the structure of future projects and manage their risks. The contribution of risk management to project success is indirect, because the information collected is used in future projects. The management approach considers risk management to be a management instrument by which information is collected and analysed to support the deci- sion making process in a particular project. This approach does not look for generic risks, but instead focuses on man- aging the risks that are relevant in the project in question. During risk identification, checklists may be used, but the focus is on project specific risks. Therefore, free-format information generation techniques like e.g. brainstorm ses- sions are used often. The eventual contribution of the risk management approach to project success is direct. We have used these two approaches to categorise the various research publications. Table 1 presents an overview of the typical characteristics of both approaches.

The evaluation approach aims at:

Finding generic risks
Future projects
Analysis only
Creating general applicable information

The management approach aims at:

Finding specific risks Current project Various activities Achieving direct results

Fig. 3 shows both risk management approaches com- bined. The evaluation approach assumes that known risk factors are used in the current project, contributing to the management of the project and as a result to positive pro- ject outcomes. This is indicated with the arrow labelled ‘‘use is assumed”, because the publications reviewed in this paper provide no indications that the relation between pro- ject success and the actual use of knowledge on risk factors has been investigated.

2.2. How project success is defined

The success of a project is traditionally measured by time, budget, and requirements criteria. Despite the fact that this manner of measuring project success is currently subject to widespread criticism, these criteria are still often used in publications on project success in IT projects (The Standish Group International, 1999; Royal Academy of Engineering, 2004). The criticism refers to three points, which are related to the assumptions that this definition is based on:

the amount of time, the budget, and the project’s requirements can be set at the beginning of the project; the project’s success is the same for each project

stakeholder;
the project’s success can be determined at the moment

the project has produced its deliverables.

Turner and Cochrane (1993) state that the time–budget– requirements definition of project success is solely directed at the interests of the vendor or supplier. Some years ear- lier, De Wit (1988) already stressed the importance of including various stakeholders’ perspectives in defining project success. Setting time and budget limits and defining the requirements always take place at the beginning of the project, when uncertainty is at its maximum (Pinto, 2007), and it is practically impossible to set realistic limits and goals. In our research we have investigated which project success definitions have been used in the various studies in order to determine the extent to which project risk man- agement has contributed to project success, and to com- pare and categorise the publications.

2.3. How the view on projects influences risk management approaches and project success

With its origin in engineering, project management assumes that the application of processes and procedures ‘‘according to the rules of the handbook” automatically leads to good project results. In case a project fails, the pro- ject processes and procedures have to be better executed or improved (Chen et al., 2009). Although this functionalist- instrumental view of projects has been subject to debate (Cicmil et al., 2006), it is clearly present in the investigated literature on risk management and project success in IT projects. This view defines risk as all situations or events that cause disruptions in the plan, and jeopardise the timely delivery of the project results agreed upon within the bud- getary limits. This definition implies that there is a plan, and that the path that leads to the result is known (Loch et al., 2006). In addition, it is assumed that project success in terms of time, budget and result, can be set at the start of the project. The evaluation approach, however, tries to learn from past projects, by evaluating the risks that have occurred. This evaluation may result in the adjustment of the use of the methodology, or even in the adjustment of the methodology itself. The management approach to risk management, with its process based on rational decision making, fits in well with the engineering view on project management. It is aimed at identifying the concrete events or situations within a specific project which disrupt the plan, and developing measures to keep the project on track.

Explanation / Answer

Risk Management and project success in IT projects

2.1 How Risk management is approached

Many IT project researchers have a common interest in the area of risk and uncertainty present in these projects. They have published multiple researches on risk management which they consider as an evaluation process to discover causes of project failure so as to avoid them in future for a project’s success.

There are two approaches for IT project risk management: evaluation and management.

The best results are achieved through combined approach by evaluating all known risks from previous projects are analysed for better management and project planning leading to successful outcomes.

2.2 How project success is defined:

`The success of a project is traditionally measured by time, budget and requirement criteria set at the beginning of the project as per the expectations of vendor or supplier. However this method faces a lot of criticism due to two factors: the uncertainty level are very high at the beginning of the project leading to unrealistic goal setting and the success measures are not defined keeping all the stakeholders’ perspectives in mind. The researchers have analysed the projects based on what factors lead to their success and how risk management contributed to it.

2.3 How the view on projects influences risk management approaches and project success

The engineering view on project management states that positive results can be achieved in project if all the processes are followed as per a defined plan. If any failure occurs then the plan has to be better executed or improved as the success factors are defined at the beginning of project in terms of time and budget. Evaluation approach however learns from risks in previous projects and changes the processes accordingly to avoid project failure. Management approach is similar to engineering view where issues and risks in existing plans are identified and better measures are developed to monitor them in order to ensure project success.

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