Developing a Risk Management Model for Project Based Organizations

Abstract

Uncertainties in industrial environments can cause considerable complexities, during the implementation and management of projects. So, performing a risk management model in such environments has become inevitable. In such circumstances, many risk management models have been introduced in literature, which majorities of them are general, while some of them are developed to be applied to specific organizations. In order to develop an effective risk management model, the main characteristics of projects like types of projects, project management processes and procedures, organizational structure and organizational roles and responsibilities should be taken to the account. The aim of this paper is to develop a risk management model for project based organization. The studied organization has several subsidiary companies and is responsible for management and execution of major industrial projects. In this research feasibility of implementation of risk management in the organization is studied, considering the main characteristics of its projects. In order to conduct the research, risk management models presented in literature is reviewed and investigated. Then, the requirements of risk management processes are examined. Moreover, organizational structure and characteristics related to risk management processes are identified by documents review and interview method. Afterward, the organization's status is evaluated and analyzed via questionnaire and interview method. In this research using existing risk management models, a risk management model which consist the processes, their details and structures is developed and verified. The proposed model has six steps consist of risk management planning, risk identification, decision making, risk response planning, and reporting system. Moreover, a risk breakdown structure (RBS) is developed in two levels. The first level consists of technical, cost and financial, organizational, procurement and contractual and external risks. The research’s findings shows that risks resulted from internal contracts are the most important ones. Furthermore, some suggestions are proposed for implementing the model, based on advantages and improvement potentials of the organization. Based on the research’s findings, organizational requirements for performing risk management processes consist of management's belief in risk management, organizational attitude and culture, risk management background in the organization, related laws and regulations, possibility of access to data and information related to risk management processes, availability of software and its requirements, organizational capability for establishing risk management teams, accordance of managers responsibilities with their authorities. It is found that management's belief in risk management with the score of 70%, and related regulations with the score of zero are the most and the least important requirements, respectively. Overall, this paper introduces a general method for developing a risk management model in any organization. Also, a risk breakdown structure and a risk management model for industrial project based organizations are developed, with some suggestion for execution of each process. Moreover organizational requirements for implementing the model are explained. The findings of this research can be used in similar high-tech organizations, with limited financial and human resources and vast internal and external communications.