May 01, 2011

ERP project risk assessment

One reason often cited for any software project failure is that managers do not properly assess and manage the risks involved in their projects. Most project managers perceive risk management processes as extra work and expense; thus, risk management processes are often expunged if a project schedule slips.

In the past, several ways were proposed in order to improve the success rate of ERP introduction, unfortunately without great effect. The nature of IT project risk is determined by the risk factors and by the strategic need for the project, innovation, repetition of failed experience, etc. Many processes have been developed in recent years to address the need for a more effective risk management, though they are often too general for ERP application, models including PMI 2001, Standards Australia 1999, SAFE methodology, and Risk Diagnosing Methodology are typical iterative approaches to risk management problems . Main phases are: 1. context analysis; 2. risk identification; 3. risk analysis; 4. risk evaluation; 5. risk treatment; 6. monitoring and review; 7. communication and consulting.

However, ERP projects are interdisciplinary; they affect interdependencies between business processes, software and process reengineering. Critical factors include technological and management aspects, both psychological and sociological. To be effective a risk assessment method should consider several potential aspects (technology, market, financial, operational, organizational, and business) and link them to the project life cycle. This ensures the selection of the most appropriate risk treatment strategy.

Risk management strategy consists of two approaches. The first aims at reducing risky circumstances, while the second deals with risk treatment after a risk appears.

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  1. Aliye Betul GULEC

    A very important point. Many ERP implementations do not succeed the expected targets. One of the reasons is the Risk Assessment. Risk Assessment has an important impact on the success of an implementation, but the importance of risk assessment is generally neglected and it is seen as extra cost. To implement an adequate strategy firstly the ERP risks should be understood. According to the (Iskanius, 2009) several studies have classified the ERP risks in 6 dimension; 1) organizational, 2) business-related, 3) technological, 4) entrepreneurial, 5) contractual and 6) financial risks. In addition to these risks, the common failure factors should be understood and analyzed to not to make common mistakes. The common ERP implementation failure factors are; 1) inadequate ERP selection, 2) poor project team skills, 3) low top management involvement, 4) ineffective communication system, 5) low key user involvement, 6) inadequate training and instruction, 7) complex architecture and high numbers of modules, 8) inadequate business processes, 9) bad managerial conduction, 10) ineffective project management techniques, 11) inadequate change management, 12) inadequate legacy system management, 13) ineffective consulting services experiences, 14) poor leadership, 15) inadequate ICT system issues, 16) inadequate ICT system manutenibility, 17) inadequate ICT supplier stability and performances, 18) ineffective strategic thinking and planning, 19) inadequate financial management. In addition to those factors, an organization should consider the risk and failure factors specifically for its position. (Iskanius, 2009).

    soruce : Iskanius, P. (2009). The ERP Project Risk Assessment – A case study. Proceedings of the World Congress on Engineering, (s. 1-5). London.

    22 May 2011, 13:20

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