Case Study in Risk Management

In the case study, the United States is in the process of developing a sophisticated weapon system that would cause massive destruction to their enemies in case of an attack. The decision is a protective measure following World War II. One of the phases of the Advanced Tactical Missile Program is R&D, which is awarded to Altex Corporation. The project manager at Altex Corporation and one of the sponsors disagree on whether to develop a risk management plan or not.

The sponsor argues that the invention of a weapon with non-existent technology has almost impossible requirements.  He goes ahead to say that it would take luck to deliver three-quarters of the specifications.  On hearing this, the manager is shocked because the proposal states that the company would even exceed the specifications. The sponsor makes it clear that saying that was the only way they would win the contract, and it is not a new tactic. He goes ahead to brag of his optimistic engineers, who would lose morale if there is to be a contingency plan development. On the other hand, the project manager argues that optimistic engineers are reactive thinkers. In the case of resurfacing of problems, they would need to work with crisis management, which would increase costs in the long-run.

Finally, the sponsor explains that having the plan is useless when they can spend as much as they would like to meet specifications. Furthermore, if they reach the seventy percent specifications minimum, then they will secure more contracts with the Army, hence more profits. He goes ahead to clear the manager’s doubts by assuring him that the Army knows of all those risks, and it does not want them publicized to the superiors; otherwise, the project could be canceled. At this point, they both reached the agreement to keep the plan to themselves and will be truthful about it when the project is too long-gone, hence no risk of termination.

Questions and Answers

1. Why was a risk management plan considered unnecessary?

At the time, contracts did not necessitate the development of a risk management plan. Having the program would only expose the multitude of risks and may lead to cancellation of the project, hence causing a loss. Also, they figured that the army personnel already knew that a project using utterly new technology comes with many complexities. Publicizing them would only make it worse since superiors may get worried. Furthermore, having a plan would make engineers less optimistic.

• Should risk management planning be performed in the proposal stage or after contract award, assuming that it must be done?

A Risk management plan is not a separate entity but an integral part of the planning and management.  It should be developed early during the planning phase to enable the identification, assessment, and mitigation of risks that could affect the project (Roopoosh, 2015). At the same time, throughout the program continuously. An initial interaction can, therefore, be developed at the proposal stage so that both parties can get a clear picture of what they are getting into hence prepare adequately in terms of cost prediction. The winning company can perform an in-depth risk management plan later on after commencing works.

• Does the customer have the right to expect the contractor to perform risk analysis and develop a risk management plan if it is not called out as part of the contractual statement of work?

As much as it is not a requirement, the customer should expect a risk management plan from the contractor.  A risk management plan will be beneficial in several ways. According to (Meiryani, 2018), it will increase the likelihood of success and, at the same time, reduce the likelihood of failure and uncertainty in leading the overall specifications of a project.  Secondly, it will act as a useful tool in ensuring accountability and performance measurement, hence promoting efficiency in all levels of contract performance. Lastly, it will be a considerable proof of the professionalism of a contractor.

• Would Altex have been more interested in developing a risk management plan if the project were funded entirely from within?

Yes, it would be more inclined to perform a risk management plan if the Corporation was funding itself. Since they would have so much to lose, being ready for any risk along the way would ensure that the project runs smoothly. Failure to fulfill specifications would potentially lead to termination of the contract even after kick-off.  Since their main goal is to generate more profits from the follow-on projects, having the risk management plan would lead to exemplary work hence ensuring the relationship gets to that level.

• How might the Army have responded if they were presented with a risk management plan early during the R&D activities?

The Army would be able to find the most suitable contractor to do the job. In the case study, the Army is probably aware of the risks, but they also choose to ignore it so that they can secure their careers. By downgrading the specifications, then the Army will not meet its full potential in terms of developing the best possible weapons. Alternatively, knowing and understanding risks before completion of the project would make it easier to alter the budget so that they could reap all the potential benefits.

• Can risk management planning be justified on almost all programs and projects?

Yes, risk management should be an integral part of any project. It influences the decision making business success because it allows for the identification and analysis of the most appropriate ways to respond in case of adversities. Also, according to Rehacek & Bazsova (2018), risks cause overruns in time and cost in all types of projects.  Project managers should, therefore, invest in a risk assessment that effectively analyzes and evaluates risks associated with each project.

References

Meiryani, A. (2018). The Importance Of Risk Management In An Organizations [Ebook] (p. 105). INTERNATIONAL JOURNAL OF SCIENTIFIC & TECHNOLOGY RESEARCH. Retrieved 29 June 2020, from http://www.ijstr.org/final-print/nov2018/The-Importance-Of-Risk-Management-In-An-Organizations.pdf.

Rehacek, P., & Bazsova, B. (2018). Risk Management Methods in Projects. Journal Of Eastern Europe Research In Business And Economics, 1-11. https://doi.org/10.5171/2018.790198

Roopoosh, p. (2015). Risk Management for Project Managers Case Study #1 Spring 2015. Academia.edu. Retrieved 29 June 2020, from https://www.academia.edu/12178376/Risk_Management_for_Project_Managers_Case_Study_1_Spring_2015.