Risk Management Harvard Case Solution & Analysis

1.     INTRODUCTION

Risk and uncertainty are the two major terminologies, which are used to define the unpredictable nature of the future. In risk, multiple outcomes are known for a particular action as well as probability for each outcome is known but in uncertainty multiple outcomes are unknown; however, the probability for each outcome is unknown that makes it even more difficult.

In financial terminology, risk can be defined as the unpredictable nature of an action, which may lead to attainability of something of value or potentially losing something of value. The greater the risk one desires to take; the greater are the chances of generating value alongside there are equal chances of losing value.

Business risk is defined as any unpredictable event, which may lead to financial losses to a business, that maybe economic downturn, increase in competition or any government regulations. A company needs to make contingency plans regarding each risk, which has the maximum chances of occurrence and can have the maximum damage to the company.

Psychological perception is the study of factor, mental function and behavior that leads to thought provoking process and every person has their own sense of perception. The use of weapons to protect oneself is perceived as a right by a group of people whereas others perceive this action to be unlawful and condemn it. Everything we touch, feel, smell, taste, hear leads us through a thought provoking process; which ultimately leads us to a conclusion that creates our perception. Perception is influenced by the culture we develop in, the people we stay in touch and all the information we absorb from our environment.

a)     PSYCHOLOGICAL PERCEPTION OF RISK

This is a study that navigates the facts of decision making of an individual regarding an action leading to unpredictable outcomes. This is a study that shows how an individual perceives risk, there are three forms of perception to risk leading to three types of people either the risk is perceived to be too high or the risk is perceived to be too low, for e.g. if the actual risk of an action is high but is perceived to be low by an individual then that person is said to be a risk taker. No matter what the risk is but a person will always perceive it as high, which means that person is a risk averse and finally a person who evaluates every aspect of risk concluding the risk not being too high or too low is said to be risk neutral.

b)     IT MANAGER

Brain is the central nervous system of the human body; however, the same goes for information technology system as is the nervous system of the business. The information technology system enables fast access to all the users of the company to unlimited information and through this information regarding every operation of the company, it not only helps the company to connect with it suppliers and customers but it also connects all employees within the company to be in a continuous link. Now the person responsible for conducting, maintaining, updating, improvement and rectification for this massive system on which the company relies on heavily is the IT Manager.

The IT manager is required to generate value for the company by using the technology base setup within the company; this can be achieved by aligning the business strategies with the information technology system of the company so as to be able to establish a strong and clear link with the internal and external environmental factors of the company. An innovative IT system developed by the IT manager is able to achieve synergies within the company leading to an effective value chain.

c)      RISK INVOLVED IN IT:

There are many major risks involved with IT project development and implementation. These are as follows:

i.            FLAW IN ESTIMATION OF COMPLETION:

The initial estimate made regarding the completion of the project is not always correct due to the intangible nature and complexity of the software, which makes it difficult for the development team to produce a valid schedule.

ii.            INCREASE IN REQUIREMENTS:

During the development it is seen that most of the time, features that are not estimated during the initial development of the plan of the software leads to question the viability of the project. Factors such as inflation, economic change, release of a new technology before your released software makes it outdated, etc.

iii.            LOSS OF KEY EMPLOYEES:

Key employees and developer who leaves during the development or during the early implementation of the project creates an information gap leading to delays in the project.

It is the job of the IT manager to consider these risks while the development of the software, now it depends upon the IT manager what he considers or perceives as the risk whether it is worth considering or not....................

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