Risk Identification in Project Management PDF

Unit-2 Technical Appraisal IDENTIFICATION OF RISK Identifying [risk](https://www.geeksforgeeks.org/software-engineering-risk-management/) is one of most important or essential and initial steps in risk management process. By chance, if failure occurs in identifying any specific or particular risk...

Unit-2 Technical Appraisal IDENTIFICATION OF RISK Identifying [risk](https://www.geeksforgeeks.org/software-engineering-risk-management/) is one of most important or essential and initial steps in risk management process. By chance, if failure occurs in identifying any specific or particular risk, then all other steps that are involved in risk management will not be implemented for that particular risk. For identifying risk, project team should review scope of program, estimate cost, schedule, technical maturity, parameters of key performance, etc. To manage risk, project team or organization are needed to know about what risks it faces, and then to evaluate them. Generally, identification of risk is an iterative process. It basically includes generating or creating comprehensive list of threats and opportunities that are based on events that can enhance, prevent, degrade, accelerate, or might delay successful achievement of objectives. In simple words, if you don't find or identify risk, you won't be able to manage it.  The organizer of project needs to expect some of the risk in the project as early as possible so that the performance of risk may be reduced. This could be only possible by making effective risk management planning. A project may contain large variety of risk. To know the specific amount of risk, there may be chance of affecting a project.  So, this is necessary to make categories into different class of risk. Risk identification is a crucial step in project management that involves identifying, assessing, and documenting potential risks that could impact the project\'s objectives. Effectively identifying risks helps project managers and teams develop strategies to mitigate or manage them proactively. Here are some steps and methods for identifying risks in project management: **Methods for Identifying Risks** Risk identification is a crucial step in project management that involves identifying, assessing, and documenting potential risks that could impact the project\'s objectives. Effectively identifying risks helps project managers and teams develop strategies to mitigate or manage them proactively. Here are some steps and methods for identifying risks in project management: 1. **Project Team Brainstorming**: Gather the project team members and stakeholders to brainstorm potential risks. Their diverse perspectives can help uncover a wide range of risks. 2. **Historical Data**: Review past similar projects or industry-standard data to identify common risks. Historical information can provide valuable insights into risks that have arisen in similar situations. 3. **Checklists**: Use risk checklists specific to your industry or project type. These checklists typically include categories of risks that you can review to identify potential issues. 4. **SWOT Analysis**: Conduct a SWOT (Strengths, Weaknesses, Opportunities, Threats) analysis to identify both internal and external factors that may pose risks. 5. **Interviews and Surveys**: Interview subject matter experts, stakeholders, and team members to gather their insights on potential risks. Surveys can also be useful for gathering input from a larger group of people. 6. **Documentation Review**: Analyze project documentation, such as project plans, requirements, and contracts, to identify inconsistencies, ambiguities, or potential sources of risk. 7. **Risk Categories**: Consider different categories of risks, such as technical, financial, operational, and external risks, to ensure a comprehensive assessment. 8. **Risk Registers**: Create a risk register or log to record identified risks. This document should include information about the risk, its potential impact, likelihood, and the proposed mitigation or response strategy. 9. **Brainstorming Techniques**: Use various brainstorming techniques like mind mapping, affinity diagrams, or the Delphi method to encourage creative thinking and risk identification. 10. **Expert Consultation**: Seek advice from experts in the field who may have experience with similar projects or risks. Remember that risk identification is an ongoing process throughout the project lifecycle. New risks may emerge, and previously identified risks may change in their likelihood or impact. Therefore, it\'s important to regularly review and update the risk register to ensure that the project remains on track and that risks are effectively managed. Top of Form **Project Location and Site Selection** Selecting the right location and site for a project is a critical decision that can significantly impact its success. Whether you\'re planning a construction project, launching a new business, or setting up a manufacturing facility, here are the key considerations and steps for project location and site selection: **Step 1: Identify the project team** The first step is to establish a project team. The team will typically include representatives from the executive team, business unit, real estate department, logistics department, tax department, human resources, and outside site selection consultants. **Step 2: Define the project requirement** Project requirements vary significantly based on the project type. The requirements for a software development operation will dramatically differ from a manufacturing plant. The project team will need to work closely together to identify key dates, employee skill requirements, projected headcount, desired labor rates, capital investment, accessibility to customers/suppliers, real estate needs, and infrastructure requirements.   **Step 3: Conduct a geographic filtering process based on the project criteria** To properly filter locations, bulk data will have to be gathered to build a filtering model with relevant data aligned with your site selection criteria. Typically, companies will use data variables such as population, demographics, unemployment rate, cost of living, utility costs, industry presence, inbound/outbound materials, wage rates, union rates, tax rates, time zone, and other similar variables to narrow the list to a long list of five to 10 locations. Many companies often think they can decide from this level of data which is typically a major mistake.    **Step 4: Conduct an in-depth analysis of the long list to identify the finalists** To identify the finalist locations, the site selection team will need to perform a rigorous workforce, infrastructure, logistics, business climate, economic incentive, and real estate market analysis of the five to 10 candidate locations. This research will include the gathering of detailed demographic data as well as the primary research that will be analyzed in various site selection models that will need to be developed. The following provides a sample of the information that needs to be uncovered and compared utilizing a balanced scorecard-type approach: - Demographics - Educational attainment - College and universities - Historic unemployment - Location, size, and wages of competitors - Local employment drivers - Military presence - Recent expansions - Recent closures - Wage rates - Infrastructure conditions (roads, utilities, fiber, etc.) - Utility costs (electric, water, gas) - Logistics costs - Customer accessibility - Tax rates - Real estate availability - Economic incentive availability - Economic incentive comps - Employer interviews - Economic development interviews Through the analysis of this research, the project team will identify a shortlist of locations using some type of weighted model that scores each location based on quantitative and qualitative factors such as labor market scalability, employee demographics, labor quality, competition, supplemental labor sources, cost of living and wages, business environment, accessibility, logistics, operating costs, real estate availability and the economic incentive environment. This research will result in the identification of two to three finalist locations. **Step 5: Site visits to finalist locations** Once the short-listed communities have been agreed upon, the project team will conduct on-site community due diligence to gain a thorough understanding of what a particular community has to offer. The tours will typically take one to two days per community in the U.S. and up to a week in international locations. During the tours, the project team will meet with community leaders, regional economic development officials, workforce training representatives, staffing agencies, local employers, utility providers, and real estate brokers. The anecdotal evidence uncovered during the tours will be crucial to the success of the site selection process and enable the team to truly understand the qualitative differences of each finalist location. **Step 6: Negotiations** Once the community tours are completed and the finalist locations have been identified, the project team will initiate the simultaneous negotiation of economic incentives and real estate terms. It is critical to carefully control the negotiation process to maximum leverage and make sure commitments for real estate don't conflict with a company's ability to secure the economic incentives.  The economic incentives negotiations will typically be managed by someone from the tax department or the site selection consultant who will initiate formal discussions with local and state leaders to confirm the availability of economic incentives such as tax cred its, tax abatements, cash grants, training subsidies, utility rebates, and other related incentives. It is critical to understand the financial benefit of operating in each site by forecasting the net benefit of incentives and evaluating clawbacks and compliance implications for the various jurisdictions.  Real estate terms will be negotiated at the same time as economic incentives by the real estate director or site selection consultant. If a local commercial real estate broker is hired, it is critical to enlist a firm that only represents tenants, not owners, to ensure there are no conflicts of interest. The negotiations will revolve around finalizing the deal terms such as the amount of space, rental rate or purchase price, concessions, improvements, renewals, expansion, and contraction rights.  **Step 7: Build-out of the site** Once the economic incentives and real estate are secured, you will need to address the construction of the project which ranges in complexity greatly if it is an existing building or a greenfield site. The construction team will develop detailed project budgets and schedules for the project and then follow the project through until move-in. Selecting the vendors such as architects, engi nears and general contractors with experience working on similar facilities can prove critical to delivering the project on time and within budget..  **Conclusions** Due to the increasing complexity of the site selection process, it has become more challenging for companies to self-perform this process. If companies want to minimize the risks of making a bad location decision, then it is important to rely on experts who proactively maintain global location intelligence data, possess the tools to evaluate locations, and have hands-on experience in various geographies. Plant capacity -- It refers to the volume or no. of units that can be manufactured during given time period. It is also known as production capacity. It is the task of the project manager to determine the feasible normal capacity and nominal maximum capacity for the project Selection of technology Selecting the right technology for a specific project or task is a crucial decision that can significantly impact the success of your endeavor. The choice of technology should be based on various factors, including your project\'s requirements, goals, budget, timeline, and the skills of your team. Here\'s a step-by-step guide to help you make an informed technology selection: 1. **Define Your Project Goals and Requirements:** - Start by clearly defining the goals and objectives of your project. - List down the specific requirements your technology must meet, such as scalability, performance, security, and compatibility. 2. **Assess Your Team\'s Skills:** - Evaluate the technical expertise of your team members. - Consider whether you have in-house expertise in a particular technology or if you\'ll need to hire or train staff. 3. **Budget Considerations:** - Determine your budget for technology adoption, including licensing fees, hardware costs, and ongoing maintenance expenses. - Consider the long-term costs associated with the technology. 4. **Scalability and Future Growth:** - Think about the scalability of the technology. Will it be able to handle growth in terms of users, data, and features? - Consider whether the technology will remain relevant and supported in the long run. 5. **Security and Compliance:** - Assess the security features and compliance standards of the technology. - Ensure that the chosen technology aligns with your organization\'s security and regulatory requirements. 6. **Compatibility and Integration:** - Check whether the technology can seamlessly integrate with your existing systems and tools. - Evaluate its compatibility with other technologies you plan to use. 7. **Performance and Speed:** - Analyze the performance characteristics of the technology, such as processing speed and response times. - Ensure it meets the performance requirements of your project. 8. **Community and Support:** - Research the technology\'s community and support resources, including user forums, documentation, and third-party libraries. - Active communities often provide valuable assistance and updates. 9. **Vendor Reliability:** - If you\'re considering a commercial solution, assess the reputation and reliability of the vendor or provider. - Look for customer reviews and case studies. 10. **Prototyping and Testing:** - If possible, create prototypes or conduct small-scale tests to assess how well the technology meets your needs. - Identify any potential challenges or limitations early in the process. 11. **Evaluate Alternatives:** - Don\'t rush the decision-making process. Consider multiple options and weigh their pros and cons. - Seek input from relevant stakeholders and team members. 12. **Plan for Implementation and Training:** - Develop a plan for implementing the chosen technology, including migration if necessary. - Ensure that your team receives the necessary training and resources to use the technology effectively. 13. **Continuous Evaluation:** - After implementation, continuously monitor the technology\'s performance and gather feedback from users. - Be prepared to make adjustments or consider alternative technologies if issues arise. 14. **Document Your Decision:** - Keep detailed records of why you chose a particular technology, as this can be valuable for future reference and decision-making. Remember that there is no one-size-fits-all solution, and the best technology choice will vary depending on your unique project and organizational context. Regularly reassess your technology stack to ensure it remains aligned with your evolving needs and goals. Top of Form **Plant Layout** ### Concept of Plant Layout: Plant layout is a plan for effective utilization of facilities for the manufacture of products; involving a most efficient and economical arrangement of machines, materials, personnel, storage space and all supporting services, within available floor space. **Definition** "Plant layout is a plan of optimum arrangement of facilities including personnel, equipment's, storage space, material handling equipment and all other supporting services along with the decision of best structure to contain all these facilities." ### Objectives/Advantages of Plant Layout: i. Streamline flow of materials through the plant. ii. \(ii) Minimize material handling. iii. \(iii) Facilitate manufacturing progress by maintaining balance in the processes. iv. \(iv) Maintain flexibility of arrangements and of operation. v. \(v) Maintaining high turnover of in-process inventory. vi.  Effective utilization of men, equipment and space. vii. \(vii) Increase employee morale. viii. \(viii) Minimize interference (i.e. interruption) from machines. ix. \(ix) Reduce hazards affecting employees. **Project Schedule**  **Project schedule** simply means a mechanism that is used to communicate and know about that tasks are needed and has to be done or performed and which organizational resources will be given or allocated to these tasks and in what time duration or time frame work is needed to be performed. Effective project scheduling leads to success of project, reduced cost, and increased customer satisfaction. Scheduling in project management means to list out activities, deliverables, and milestones within a project that are delivered. It contains more notes than your average weekly planner notes. The most common and important form of project schedule is Gantt chart. x. Lightbox **Advantages of Project Scheduling:** **\ **There are several advantages provided by project schedule in our project management: - - - - **Project Selection** --------------------- Project selection in project management refers to the process of an organization choosing one out of many projects so that the project can reap the most benefits. Projects should be able to align with an organization\'s goals and ensure that the resources are not misused.  This is one of the most crucial actions for an organization. Choosing the right project is not sheer luck, and it is about analyzing data-driven insights to follow the most beneficial approaches and choose the best project that reaps the most benefits for the company. A [Project Management Training Program](https://www.knowledgehut.com/project-management-certifications) can teach you the technicalities associated with project selection. ### Project Manager Role in Project Selection Due to their experience in project planning, execution, and delivery, the project manager plays an important role in the Project Selection process by providing input and recommendations to senior management on the feasibility of proposed projects. The project Manager must ensure that the projects chosen are in line with the organization\'s overall strategy and are feasible given the available resources and timeline. Project Selection Methods ------------------------- Choosing the wrong project can cause havoc to an organization and hinder its growth. Listed below are some of the most popular project selection tools organizations can use to understand which project they should proceed with.   ### A. Benefits Measurement Methods **1. Cost-Benefit Analysis   ** This is one of the most important tools for project selection which helps organizations analyze which decision they should proceed with and which one they should let go of. This process involves adding up the potential earnings that are expected from action and then deducting the costs incurred as input costs while taking action.  This tool measures tangible aspects like financial metrics, including the cost saved or revenue earned during a project, and intangible aspects, such as customer satisfaction and employee morale. Based on the conclusions drawn, an organization decides whether to proceed with or forego a project.  **2. Payback Period ** As the name suggests, this method of project selection helps determine the time in which the initially incurred costs while starting a project can be recovered. The sooner the initial investment can be recovered, the more desirable it is for the company to proceed with the project.  **3. Discounted Cash Flow**    This project selection tool helps determine an investment\'s present value by considering the estimated revenue generated compared to the investment in the coming years. In this method, the value of an investment is determined based on future cash flows. If the DCF of a project is higher than the initial cost incurred, then the project is considered profitable.    **4. Opportunity Costs ** Opportunity costs are a great tool for project selection that organizations can use to make informed project choices. Opportunity cost refers to the highest value organizations have to give up to opt for their choice of project.\ To put it in simple words, opportunity cost helps to determine the opportunity which might be overlooked when an organization chooses one project over the other.  **5. Ranking Method   ** Organizations use this simple method of project selection to prioritize the projects that will earn them the most profits. Projects are ranked based on their importance. This is a comparatively quicker and easier approach as it helps the companies identify the top-most priorities at the earliest.  **6. Scoring Model**  In this method of project selection, there is a list comprising all the criteria that need to be considered while choosing a project. A dedicated committee is assigned the task of weighing the list with respect to the priorities and importance of all the projects under consideration. The redeemed values are thus evaluated, and the project that secures the highest score is selected.  **7. Analytical Hierarchy Process ** This analytical hierarchy decision-making method is used in project selection where the environment is complex and has multiple alternatives and criteria. The decisions are made using psychology and mathematical algorithms. A scoring system is implemented to make unbiased decisions on potential projects an organization should proceed with.  The analytical hierarchy process of decision-making involves three steps. At first, the problem is identified, then the probable alternatives are analyzed, and finally, the best option is chosen.  We hope this offers you a detailed insight into the different tools to help an organization arrive at a fruitful and concrete project selection decision. The article\'s next section deals with the different project selection process steps. ### B. Constrained Optimization Methods **1. Linear Programming** Linear Programming (LP) Constrained Optimization is a technique that involves maximizing or minimizing an objective function while keeping a number of constraints in mind. It has a wide range of applications in operations research, management science, and economics. The method entails graphically representing the problem and using algorithms such as the Simplex Method or the Interior Point Method to find the best solution. **2. Non-linear Programming** Non-linear Programming (NLP) Constrained Optimization is a technique for optimizing non-linear objective functions that are constrained in some way. This method is useful when the objective function and constraints have non-linear relationships, and the optimal solution cannot be easily found using linear programming methods. To find the best solution, the method employs iterative algorithms such as the Gradient Descent Method or the Newton-Raphson Method. **3. Integer Programming** Constrained Optimization with Integer Programming is a technique that involves optimizing an objective function subject to a set of constraints, with the additional requirement that some or all of the variables take integer values. The Integer Programming method is extremely useful when the decision variables have discrete values, and the optimal solution cannot be easily found using linear programming methods. To find the best integer solution, the method employs algorithms such as the Branch and Bound Method and the Cutting Plane Method. **4. Dynamic Programming** Programming Dynamically Constrained Optimization is a technique for optimizing a function over time. This method is useful for problems where the optimal solution is determined by decisions made at each stage as well as decisions made earlier in the process. The method entails breaking the problem down into smaller sub-problems and solving them iteratively to arrive at the best solution. The Bellman Equation is frequently used in dynamic programming to find the best solution. What are the Steps in Project Selection? ---------------------------------------- Here are the steps in project selection:  - **Identify Potential Projects: **The first step in project selection is to identify potential projects that are aligned with the goals and objectives of the organization.  - **Evaluate Projects:** Assess the feasibility, potential benefits, risks, resource availability, stakeholder management, and regulatory compliance of potential projects.  - **Project Prioritization:** Arrange the evaluated projects in order of importance to the organization and potential impact on organizational goals. - **Choose Projects:** Choose projects that have the greatest potential to add value to the organization while also aligning with its goals and objectives.  - **Create a Business Case: **Create a business case outlining the benefits, costs, risks, and timeline for the selected projects.  - **Obtain Approval:** Obtain approval from senior management or the project sponsor for the selected projects. Project Selection Criteria -------------------------- Project selection criteria are a set of guidelines or standards used for evaluating and prioritizing potential projects based on their strategic alignment with organizational goals, feasibility, potential benefits, risk assessment, resource availability, stakeholder management, and regulatory compliance.  These criteria serve as a decision-making framework during the project selection process, ensuring that selected projects are aligned with the organization\'s objectives and have the greatest potential to deliver value. Project Selection Process ------------------------- The project selection process has to follow a list of concrete steps to ensure quality is not compromised at any stage of the selection process. The project selection steps are discussed below.  - **Create a List of Projects:** This is the first step to beginning your selection process. You will have to create a list of all the projects the organization struggles to decide on.  - **Compare the Projects:** Once you have gathered all the projects in one place, start comparing them. Utilize the above-mentioned tools that can help you execute your project selection and planning accurately. Shortlist the projects that will help your organization reap the most benefits while exhausting minimum resources.  - **Analyze the Results: **Once you are done comparing, it is time that you analyze the results. Look for the projects that ensure optimum utilization of the organization\'s resources and derive the most profitable outcomes.  - **Select the Project:** After thoroughly comparing the projects and their Analysis, you will be able to identify the most profitable project to proceed with. Therefore, decide the project that you wish to take up following the obtained insights from steps in the project selection process and obtain the best results.  ### Who is Responsible for Project Selection Process? In most organizations, senior management, specifically the project sponsor or portfolio manager, is in charge of the Project Selection Process. They are in charge of identifying potential projects, evaluating them against the organization\'s strategic goals and constraints, and selecting the projects with the greatest potential benefit. Project Selection Methods These eight project selection methods will help you make the right decision when choosing a project. While there are many measurement methods, such as Six Sigma and constrained optimization, these project selection methods are the most widely used: 1\. Cost-Benefit Analysis Cost-benefit analysis is used to estimate the costs and benefits associated with a particular project. In other words, it's a method to discover the most cost-effective way to execute a project. This is done by defining all the costs, both direct, indirect, intangible and more against the benefits, be they direct, indirect and so forth. ProjectManager has an article that provides a step-by-step guide to a cost-benefit analysis that goes into this in-depth. 2\. Scoring Models Scoring models are used when the project manager or project selection committee makes a list of project criteria and scores each according to their relevance, importance and priority. This gives a more objective view of the project. When done, you can put the projects in a list from best to worst, and the top project will likely be the one more beneficial and feasible to take on. 3\. Payback Period One criterion for a successful project is making back the money you've invested. The project payback period is a method to see the ratio between the total cash to the average cash period (payback period = cost of project / average annual cash inflows). In other words, you can determine how long it will take for you to recover the investment. However, it doesn't consider the time value of money nor benefits accrued after the payback period or risk inherent in the project. 4\. Net Present Value Net present value is the difference between the current value of cash inflow and the current value of cash outflow in the project. It's always a positive and the one with the highest net present value is the best project to select. Unlike the payback period, net present value takes into account the future value of money. However, it doesn't give a picture of profit or loss and isn't a method for figuring out the discount value used for the present value calculation. 6\. Internal Rate Of Return This method deals with the interest rate when the net present value is at zero (that is, when the present value of the outflow is equal to the present value of the flow.) Another way to refer to this is as the annualized effective compounded return rate or discount rate that leaves the net present value of all your cash flows from an investment at zero. This method helps determine which project will offer your organization the greatest profitability. 7\. Discounted Cash Flow This method takes into account inflation or the likely fact that today's money isn't going to have the same value as the same amount of money in the future. Therefore, you need to take into account the discounted cash flow when calculating the cost investment and return on investment of any potential project or project proposal over the project life cycle you plan to undertake. Procurement of raw materials ============================ The role of raw material procurement is vital for profitability and overall success of a business. In order to ensure a smooth supply chain management of raw materials, business can adopt strategies like building a distribution network, sourcing locally, etc. Demand aggregation can prove to be highly beneficial in procurement for large businesses. ============================================================================================================================================================================================================================================================================================================================================================= Procurement in manufacturing sector refers to the method of purchase of raw materials from an external source. Raw material procurement process involves researching, selecting, ordering, and paying for raw materials required for a business. Identifying and selecting vendors, negotiating prices and terms, and awarding contracts are some steps in the procurement process. Raw material selection involves several factors that includes cost, quality, availability, and delivery time. The procedure for procurement of materials is crucial for smooth supply chain management as procurement of materials plays a significant role in an organisation's bottom line. You need to consider the factors involved to while procuring raw materials for your business. It may be noted here that while purchasing and procurement may be used interchangeably, there is a distinction. While purchasing means the obtaining of raw materials for daily operations, the meaning of procurement refers to the overall framework set up to optimise purchase and save costs. Many companies have established a [raw material sourcing strategy](https://blog.tatanexarc.com/da/raw-material-sourcing-strategy/) for establishing a smoother procurement process. **key steps involved in the procurement of raw materials** ---------------------------------------------------------- ### **1.Need analysis** Assessing the need is the first crucial step in procurement where the company takes stock of the raw materials required from different teams and segregates the list depending on the priority of the needs. At this stage, the team handling procurement also determines the best way to procure raw materials in terms of cost saving and logistics. ### **2.Contract negotiation and approval** Once the list of procurement is decided, the procurement department identifies vendors and requests for quotes. At least three quotes are sourced as a practice, but it depends on the organisation. The vendor with the lowest quotation is selected and post approval of the quote, the raw materials are transported to the manufacturing units. ### **3.Purchase requisition** Once the list of procurement is decided, the procurement team seeks approval for the purchase. They also cross verify the list with different teams and the raw materials are approved as per their operational priority. ### **4.Purchase order review** Prior to the final approval of the order, the senior procurement manager does one final review before approval. Once the approval is obtained from the procurement manager, the list is sent to the accounts department. ### **5.Funds for raw materials are verified** Based on the list, the accounts department issues a purchase order to the vendor and releases the funds. That purchase order is an indication to the vendor that the request has been approved and that they can proceed with the request. ### **6. Shipping of raw materials** While in selected cases, the vendors arrange for the transportation of raw materials, it does not always happen in the case of all suppliers. In most cases, businesses need to arrange for their own transportation to transfer the [raw materials from suppliers](https://blog.tatanexarc.com/da/tips-for-raw-material-suppliers/) to the manufacturing units. ### **7.Invoice approval and payment** Once the raw materials reach the manufacturing unit, the products are cross verified against the bill and the invoice is approved and the payment is transferred to the suppliers.