Water Pump World
This strategy is designed to identify all risks associated with the implementation, so that all anticipated benefits attached can be achieved. Once all critical risk factors are recognized, we have further categorized the risks according to their severity through the risk assessment Matrix. The matrix will provide a basis to understand, control and thus monitor all such risks to nullify their impact. Once all such strategies are defined, the company can easily make the implementation a success and gain the maximum benefits.
Introduction
A risk Management Strategy helps an organization to evaluate the potential risks associated with the implementation of a system. It further helps in mitigation and control of all such risks to an extent so that their overall impact on the organization and its current and potential business is minimal. Risk Management helps in identifying, assessing and prioritizing risks that may occur in any form and organizations should devise strategies to get a 360 degree view of all such factors.
In the strategy all such risks are relative to the performance of a system i.e. risks affect the components as well as the overall structure, where the impact may be small or large. This is important for the overall success of any implementation taking place within the organization to achieve its goals.
Management of risks
Risk Management is the most important tool for identifying and controlling risks that take place during system implementation. This strategy is planned and devised for managing all kinds of these risks from all aspects. The following are the identified benefits that an organization can gain form an effective risk Management Strategy
Utilization of resources- The organization can identify the risk and thus use its resources accordingly
Organizational Reputation The strategy helps in protecting the image of the organization
Stability of operations All operations can be protected after the detection of risks
Pre-planning Enables the firm to be prepared for upcoming circumstances
Assistance Assists the organization in devising plans for controlling risks
Purpose
The purpose of the document is to devise a risk Management Strategy for the Water Pump world where the company is looking forward to ERP implementation for it major business functions. This document identifies and assesses major risks associated with the implementation. This document helps in planning control mechanisms for the identified risks.
Scope
The scope of this document is limited to identifying the risks associated with the successful implementation of the ERP system. The scope also includes devising plans for monitoring and controlling all such risks.
Audience
This strategy is devised for use by the all the key stakeholders involved in the Water Pump World Case to identify, control and monitor all risks associated with the ERP Implementation.
Limitations and Constraints
Measuring the risk assessment components is a challenging task. Error can be huge in this case.
ERP is very wide subject. Our literature review is limited to a few articles and books.
Risk Assessment
Risk Assessment is the objective evaluation of risk along with its two major components the first being the loss that will be incurred and its occurrence probability (Foster 2010). The major risks associated with the system implementation are as discussed below
Internal Risks
Internal Risks identifies the critical risk factors (CRFs) that impact an implementation and might be present within the organization, where the monitoring and control lies within (Anderson 2003). The literature review helps in identifying risk factors from risk management perspectives in order to gain an insight into the critical factors that directly or indirectly affect the successful implementation of any system.
Literature Review
Introduction
ERP systems have gained much recognition over time and many organizations are considering on implementing the modules of a re-known ERP system in order to access its benefits and therefore reduce cost and maximize profits. In order to gain full advantage of all such systems it is very important to analyze the risks associated with the successful usage of an ERP system and what Critical factors should be taken into consideration (Barki, Rivard Talbot 1993). For this purpose, we have collected and analyzed cases and articles on ERP implementation and the risks involved.
Case Summary
The case study in literature review is based on SAP R3 in the Water Corporation of Western Australia. This case identifies that SAP has it own implementation structure and therefore the approach should be defined appropriately to gain its maximum benefits. SAP requires a BPR strategy for organizations who adopt it. Thus, it is really important to assess all critical risk and success factors. The Water Corporation adopted a realization Strategy and Realization process for successful implementation of the ERP (ERP Studies). To put it into a nutshell, it is very important to analyze all such factors that influence and impact the use of a new system within the organization. This helps in gaining maximum benefits.
Presentation of the Review - Critical Risk Factors Identified
Goals Alignment Failure to identify a system that fits to the organizational requirements and meets its long term objectives
Organizational Resistance- Resistance to change the Organizational Structure to enhance business through the use of ERP (Quinn 2005)
Skill Matrix Lack of Human Resource Skills that have functional and business knowledge (Iskanius 2003)
Management support This may include (Thomas 2002)
Lack of Managerial Support
Choosing the right vendor
Inefficiency in making appropriate communications to explain requirements
Integration Failure to integrate with the existing applications (if any) for data centralization and sharing (Lam 2003)
Customization Standard system failure to completely adhere to the organizational requirements
End users Resistance This includes
End users reluctance to switch to the new system
Insufficient training to end users
Lack of documentation to support the system
Lack of System support managers from the vendors
Technological Infrastructure Inadequate Technological Infrastructure that would result in failure to meet the specs of the system
Project Planning inappropriate allocation of resources especially time and budget allocation
Scope Creep In ERP projects, there is always a threat of scope creep and deviation.
Risk Matrix Water Pump World Case
ConsequenceLikelihoodInsignificant (1)Minor (2)Moderate (3)Major (4)Extreme (5)Rare (1)Unlikely (2)Possible (3)Scope CreepLikely (4)Goals Alignment
Management Support
End-users Resistance
Project PlanningTechnological Infrastructure
Organizational ResistanceAlmost Certain(5)Skills Matrix
Customization
Schedule Risks
Implementation Approach
The implementation methodology for the SAP modules is Accelerated SAP (ASAP), where a phased approach will be used in the water pump world case. We will be implementing the important main modules required for the business during the first release and the rest in further releases.
Risks with the Phased Approach
The following are the risks associated with a phased approach in ERP (Doane Guzman 2006)
RisksWill incur additional Time Will incur additional Cost Will lead to problems in the ScopeDependency on other modulesaClose co-ordination Amongst StakeholdersaaIntegration between legacy and new systemaLonger time to implementaaCost Risks
Cost Estimates Cost Risks with the case may be the inaccuracy in measuring all the cost associated with the implementation (Thamhain 2005).
Project Execution Failure The project may be prolonged or delayed due to failure in part or whole of the execution
Risk of Phased Approach The phased approach takes longer time to implement which might incur additional unseen costs (Reed Doane 2002).
Risk Mitigation
Identified Risks
ImpactActionsGoals AlignmentHighA complete feasibility study is carried out for the ERP implementation to meet organizational goals.Organizational ResistanceHighSince Water Pump World is adopting an ERP solution to increase competitiveness, the organization and the analyst will work in conjunction to redesign SOPs.Skills MatrixHighProper training to all the HR involvedManagement SupportHighTo meet its goals, Management will ensure to provide complete support to the vendor. Also, thorough vendor assessment is done to select the best vendor.IntegrationHighAll integration points will be identified and studied before the start of the project to support system and data integration at all levels.CustomizationHighIn-depth requirement analysis will support all customization requirements of the Water Pump World.End-users ResistanceHighAn agreement on full co-operation from all the concerned departments of the client will be attained.Technological InfrastructureHighSystem study also covers infrastructural requirements study.Project PlanningHighProject Planning will be done by involving all key stakeholdersScope CreepMediumProject Managers are responsible to take care of deviating form the scope and additional requirements.Dependency on other modulesHighAll such dependencies will be identified in the beginning of the projectClose co-ordination Amongst StakeholdersHighA full time project coordinator will be provided by the Water Pump World to ensure timely delivery of required information.Longer time to implementHighTimelines are defined in the Gantt chart and will be strictly followed.Cost EstimatesHighCost Estimates are made keeping in view the requirements and key components of the systemProject Execution FailureHighProject should have a check and QA procedure at each level of the phased approach.Risk Monitoring
The following risk monitoring Strategies will help in further looking into the risks identified
Identified Risks
ImpactStrategyGoals AlignmentHighFeasibility StudyOrganizational ResistanceHighROI Study and Cost Benefit AnalysisSkills MatrixHighSufficient training to all key people involvedManagement SupportHighPlenty of Managerial SupportIntegrationHighComplete System PlanningCustomizationHighThorough Requirements AnalysisEnd-users ResistanceHighThorough Managerial and IT SupportTechnological InfrastructureHighPlenty of IT SupportProject PlanningHighThorough Requirements AnalysisScope CreepMediumHigh Project Management InvolvementDependency on other modulesHighThorough Requirements AnalysisClose co-ordination Amongst StakeholdersHighHigh Project Management InvolvementLonger time to implementHighGantt Chart preparationCost EstimatesHighAccurate calculation of licensing , implementing and training costs of SAP modulesProject Execution FailureHighDevelopment of Contingency Plan
Summary of Risks
The risk Management Strategy is useful in evaluating, assessing and controlling all the risks associated with the ERP implementation. The strategy focuses on pre-implementation plans and control mechanisms which will further prevent from new risks. Also, all identified risks can be taken care of at the beginning and this can save from disastrous outcomes like complete system failure. The risks identified and rated according to the risk assessment matrix shows that all anticipated risks of the Water pump World case have high value and therefore are very important to control for the successful implementation.
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