BAT Project Risk Management

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Abstract

Project management remains incomplete when risk mitigation measures are not put in place. In practice, the implementation of projects requires insightful planning for any unforeseen occurrences to ensure that the main objectives are achieved. The following report relates to an attempt by the British American Tobacco firm into China.

 

The British American Tobacco (BAT) company is a leading enterprise in the tobacco business globally. Despite the presence of many restrictions that businesses operating in the industry encounter, BAT remains steadfast in the pursuit of its goals. The view holds that it processes high quality tobacco products that contribute to the company’s dominant position. In the attempt to launch operations into China, the company must observe risk mitigation guidelines for it to succeed.

Effective Risk Management

One of the objectives of BAT project risk management is to understand the possibility and effects of uncertainty. Conducting a comprehensive risk evaluation allows identification of individuals and total risks that would derail the implementation of a project (Simon & Hillson, 2012). From risk evaluations, it is possible to identify the sources of risks and the approaches to redress the situation. Thus, conducting such assessments is necessary towards the improvement of overall project implementation.

From above, risk identification raises information about risk appetite, risk tolerance, and risk threshold. Risk appetite refers to the level of uncertainty that an organization, in this case, BAT is willing to take in the pursuit of its undertakings (Virine & Trumper, 2007). On the other hand, risk tolerance captures the degree, volume or amount of risk that BAT can withstand. Regarding risk threshold, reference is made to the measures of uncertainty or the impact that would concern stakeholders. Below a given threshold, an organization is likely to accept or reject risk.

For BAT to prosper, it must handle the issue of risk management appropriately. Proactively focusing on risk management eliminates problems that emerge because of unmanaged threats. It is also noted that in managing risks, certain tools are mandatory. For instance, an entity requires baselines and management plans. Such plans provide data pertaining to the prevailing state of affairs with specific reference to risk-affected areas such as schedule, scope as well as cost (Simon & Hillson, 2012).

A risk plan is also useful in understanding environmental factors which are likely to influence the implementation process. The significance of such considerations are critical given that understanding risk attitudes, tolerances, and thresholds inform the BAT management team on what to do.

BAT also needs a project charter, stakeholder register, and assets necessary for an effective implementation. A project charter is necessary in the identification of high-profile risks, project descriptions and requirements (Dorfman, 2007). A stakeholder register is also significant because it provides details bordering on the views, roles and expectations of stakeholders.

When making decisions, BAT might need tools such as the decision tree analysis. The tool is critical in analyzing the most preferable choices given the available options (Dorfman, 2007). Based on the selected courses of action, BAT has a responsibility of designing appropriate strategies that can lead to the attainment of predetermined goals. BAT also has the role of putting in place a fallback plan to be sought in case the initial plan fails. Apart from assessing primary risks, the organization has the duty of paying attention to secondary risks too. In this regard, contingency plans that cover time and costs must be provided for (Dorfman, 2007).

The role of holding meetings to deliberate on projects lies squarely with the BAT management team. Primarily, coming together is required to allow project managers, team members and other stakeholders to plan and carry out activities that are necessary towards project implementation. Within such meetings, risk management activities are assessed and defined. Cost elements and schedules are also discussed. Additionally, contingency plans are reviewed and updated based on changing dynamics.

Iteration is also expected of project implementers. Simon and Hillson (2012) noted that the process of project implementation is dynamic. Consequently, many changes take place during the execution of a project. The management team and other stakeholders of BAT must pay attention to the characteristics, and take adequate measures to address emerging problems. Thus, one of the risk management roles is risk iteration in light of emerging needs.

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Information Sources

Many sources of information are available. BAT project teams need to consider sourcing for information from parties involved in similar duties or oversight roles. For instance, BAT might consult other entities that might have held similar projects. In the second scenario, the team should consider seeking the opinion of qualified project managers to share their experience of running complex projects.

Work performance is also a notable source of information to project managers about risk. In practice, project implementation involves the execution of a number of tasks and roles. Along the execution phase, team members learn many aspects about a program. Famously known as, ‘learning through doing’, work performance is an integral part of knowledge acquisition. As a result, it is expected that those individuals who perform different tasks stand a good chance of learning what is required of success or failure leading to the generation of data on the way forward.

A stakeholder register is also a source of information in the implementation process. The document is useful because it describes details about each stakeholder. Such information is useful when soliciting for inputs which in-turn assist in the identification of risks (Kousholt, 2007). Of notable significance is the role of the register in understanding sponsor, customer important stakeholders’ concerns. The BAT management can conduct interviews to note the expectations of such parties. Project documents also serve as useful sources of information. The documents play the same role as stakeholder registers by providing information necessary in the identification of risks.

Besides the above sources of information, other significant ones include the following: published information such as commercial databases, academic studies, published checklists, industry studies, risk attitudes and benchmarking. Given that the above-mentioned publications are credible sources of data, they can enrich the decisions made by BAT project managers. Particularly, academic sources of information raise significant issues that project managers need to refer to in order to improve the possibility of attaining positive outcomes.

Risk Management Documentation

When carrying out an expansion project, certain expectations must be satisfied in reference to risk management documentation. The project team should prepare a risk management log or register at the planning stages (Cleland & Gareis, 2006). The log begins with the preparation of a risk management plan. At the stage, the project manager needs the input of team members and other stakeholders and potential end users. The essentiality of the risk log is in the identification of risks, their severity, and required actions. Although the document can take many forms such as spreadsheets or simple document, a table is deemed the most effective.

The risk log is a management tool, which must be reviewed and updated based on the prevailing circumstances (Cleland & Gareis, 2006). The log offers a framework that BAT managers use to capture the threats to project delivery. After the identification of potential obstacles, actions are instigated to mitigate the risks. Involving key stakeholders in the process is necessary as it broadens the view taken in assessing risk.

Based on the Project Management Institute Body of Knowledge (PMBOK), risk registers have no specific formats or components (Simon & Hillson, 2012). However, they include the following attributes: dates, risk descriptions, risk types, occurrence likelihood, severity, countermeasures, owners, status, among others. Dates are included because of the acknowledgement that the document is based on the continuous process that might require adjustments. Risk description involves documentation of details about an identified risk. Occurrence likelihood entails the probability of a risk happening. Regarding countermeasures, reference is made to the measures the BAT project team institutes to control the severity of a risk. Owners are the parties assigned the responsibility of addressing or mitigating the risk. On the issue of status, BAT project managers pay attention to the currency of a risk whether it is long or short term. Besides the above attributes, others can be added depending on the concern being addressed.

Role of Risk Management

From the previous sections, the significance of risk management is discerned. It is noted that effective risk management is critical towards identifying an undertaking’s strengths, weaknesses, opportunities, and threats. In practice, the tool involves a plan on how to tackle unexpected events. Thus, such an arrangement gives BAT managers a clear perspective on responding to the events when they emerge. In a bid to enhance the chances of succeeding, a BAT project manager must define the manner in which they will address emerging issues in order to identify, control, or avoid them. According to Simon and Hillson (2012), successful project managers are those that anticipate risk by planning, preparing, approximating results, and evaluating options in the process of project implementation.

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In order to understand the deeper contribution of project risk management, reference is made to plans, preparations, results, and evaluations. Plans are mentioned in reference to the view that risk management is about arrangements that establish lists of both internal and external threats and/or risks (Simon & Hillson, 2012). Such plans involve details about identified risks, the probability of taking place, the potential effect and control measures that can be used. Low risk engagements often lead to little or inconsequential impacts on the cost schedule and performance of a project. Moderate risks have notable effects and can lead to an increase in costs. However, high risks capture events that are likely to cost a significant investment because they can disrupt a schedule and overall performance. Thus, planning is essential for BAT in attaining project goals through the envisioning of potential risks, and taking measures to control or avoid the events.

Regarding preparation, reference is made to the operations of projects (Cleland & Gareis, 2006). For a program to run smoothly, BAT project managers must communicate the plan to other stakeholders such as team members and sponsors. Such engagement is critical because such parties are affected by the outcome. Through early identification of problems, BAT team members are able to proceed without disruptions to the project.

Through risk definition, the chances of the project management activity succeeding increase because negative risks are addressed on time. Such an arrangement allows the BAT leadership team to work within the initial budget to fulfill the target objectives. In the absence of risk management strategies, the project is likely to encounter problems owing to the vulnerability of poor planning (Cleland & Gareis, 2006). However, effective management maximizes earnings but minimizes expenses through risk mitigation. Through insightful analysis, effective management of the company prioritizes current work based on results regardless of the odds. Finally, evaluation is important in understanding the role of risk mitigation in the project management. Managers who assess the success of a project must consider the impact of the activities required to overcome challenges. Equally important fact is that, the BAT management team must have a plan on how to exploit opportunities based on the company’s strengths.

Risk Breakdown Structure

Based on the above-mentioned points, it is apparent that in the project management, risks include unplanned or unforeseen events that pose a negative effect on an undertaking. Many happenings are classified as risky if they have a bearing on costs, quality, and time dimensions of a project. As explored already, a Risk Breakdown Structure (RBS) is a major tool in managing a project effectively.

RBS takes a hierarchical representation of risks beginning from higher levels before capitulating at the finer-level risks (Cleland & Gareis, 2006). For example, at the top level, risk is split into technical, scheduling, management, or external risks. After the identification, the finer details of the threats are spelt out.

After risks are identified, the project manager scores the risks. BAT employees can use the P-I method of scoring which involves the multiplication of the probability of occurrence of an event with the impact of the risk (Cleland & Gareis, 2006). Such an approach facilitates a clear handling of emerging concerns. The tool is helpful in understanding the items that would require more attention than others would.

In practice, many risks are anticipated in the launching of a project in a foreign country. Some of the risks are classified as project risks (business, contractual, management or political), organizational, project management (costs, schedules, communication), technical, production (manufacturing and logistics), support risks (maintenance and warranty), external and procurement (material availability, lead times or quality).

The first risk is time which borders on changes to activities, alterations of schedules and possibility of delays. Concerning the risk of people, reference is made to the shortage of workers, skilled personnel, and employee strikes. Regarding costs, issues of escalation, penalties, exchange rate volatility and penalties emerge as considerable concerns. Quality is also a risk because it influences performance. Given that some parties might be subcontracted, there is a danger of mismatches in expectations and quality of work. Besides, quality concerns might lead to problems with warranties.

Conclusion

In conclusion, risk management is a core activity when rolling out projects. Thus, organizations and BAT, in particular, are obliged to make adequate preparations to control/ mitigate potential threats to project success. Using various sources of information and tools, project managers can steer projects to attain their predetermined objectives. However, the involvement of the main stakeholders in the decision-making process is mandatory if the risk plans are to succeed.

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