52nd International Scientific Conference on Economic and Social Development – Porto, 16-17 April 2020

INCREASING THE ORGANIZATION'S RESILIENCE THROUGH

PROJECT RISK MANAGEMENT

Katarina Buganova
Faculty of Security Engineering, University of Zilina, Slovakia
katarina.buganova@fbi.uniza.sk

Jana Simickova
Faculty of Security Engineering, University of Zilina, Slovakia
jana.simickova@fbi.uniza.sk

ABSTRACT
The current turbulent business environment is not only a source of opportunities for enterprises,
but also risks that threaten their business activities. Every company operating in the current
dynamic environment should concentrate on increasing the security of its activities and
processes. The reason is not only its primary effort to achieve positive economic results but
especially responsibility which the management bears in connection with all interested parties.
Due to the speed of change and fierce competition in the market, each company is forced to
adapt to change more quickly than in the past. Project management represents one of the most
effective methods for managing changes and for solving strategic or other important tasks in
organizations. It is a summary of management tasks, elements of the managing organization,
management techniques and means for realizing a project. Businesses therefore focus on
developing development and innovation projects, but they do not always achieve the expected
results. This is often due to insufficient risk management. Although risk management should
form an essential part of each project, from the initial analysis before project preparation, to
solving and evaluating the success of the project and using the experience gained in the
preparation of other projects, many managers cannot define what all falls under risk
management. The aim of the article is to point out the possibility of increasing the success of
projects through risk management as a tool for increasing the resilience of the organization as
a whole. The paper will analyze and compare selected standards and methodologies with a
focus on the risk management process in projects.
Keywords: Enterprise, Project, Resilience, Risk, Risk management

1. INTRODUCTION
Projects are currently one of the most important tools for planning and implementing change.
They are the basis for modernization and innovation of business activities and penetration of
new markets (Hudáková, 2018; Kubas 2017; Havierniková, 2019). There are many definitions
of the term project, which differ somewhat. Němec (2012) defines the project as “a purposeful
proposal to carry out some innovation at a given end and start dates.” Havlík (2004) defines the
project as “a unique process consisting of a series of coordinated and managed activities with
start and end dates, that meets specific requirements, including time, cost and resource
constraints." Project management in the organization ensures the achievement of the project
objectives depending on the set limits. Kerzner (2017) defines project management as "a set of
activities consisting of planning, organizing, managing and controlling an organization's
resources with a relatively short-term goal that has been set to achieve specific goals and
objectives. „According to Project Management Institute (2013), project management is
"applying knowledge, skills, tools and techniques designed to meet project requirements."
Neglecting or improper risk management is a problem in achieving project objectives.

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According to Korecký (2011), project risk can be understood as "an uncertain event or condition
that, if it occurs, can have a positive or negative impact on the project's objectives." According
to Gido (2015), project risks can be divided into the following categories:
x technical - may include non-compliance with customer requirements, new use of
technology and inability to meet quality standards,
x planning - the supplier may be delayed in the delivery of critical equipment,
x cost - may include the cost of material escalating more than expected,
x personnel - there may be situations where the necessary staff will not be available,
x external - include various weather effects, political factors, changes in customer
preferences,
x customer-related - e.g. delays in approving changes, difficulties in perceiving output quality
criteria, etc.

Given the pace of change and fierce competition on the market, every business is forced to
adapt much faster than in the past. Projects are often used for development and innovation, but
not all projects will deliver the expected result in Figure 1, the main causes of project failure in
2018 are listed.

Figure 1: Main causes of projects failure in 2018

Change in organization’s priorities 39%

Change in project objectives 37%
Inaccurate requirements gathering 35%
Inadequate vision or goal for the project 29%
Inadequate/poor communication 29%
Opportunities and risks were not defined 29%
Inaccurate cost estimates 28%
Poor change management 28%
Inadequate sponsor support 26%
Resource dependency 26%
Inaccurate task time estimate 25%
Inexperienced project manager 22%
Limited/taxed resources 21%
Other 10%

0% 5% 10% 15% 20% 25% 30% 35% 40% 45%

Source: based on Success in Disruptive, 2018

Most of the problems and risks associated with project management resulted from a change in
the organization's priorities, so projects often ended before the set goals were achieved.
Consequently, a change in project objectives and the incorrect collection of requirements
resulting from poor management and communication with project stakeholders, as poor
communication itself is a frequent cause of project failure, in which several stakeholders are
often of conflicting interests. There is also a lack of risk and opportunity management in the
first four, pointing to the importance of risk management in an environment where changes
need to be continually worked and reacted flexibly, whether positive or negative.

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For other reasons of project failure, it is necessary to point out the lack of change management,
incorrect planning of resources (time, costs) as well as the inexperience of project management.
The quality of service connecting risks is one of the most discussed topics of today in everyday
work and social life (Nedeliaková, 2018). If the wants to be successful in achieving and
achieving its goals, it should have implemented risk management (Lusková 2018; Havko 2017;
Sventeková, 2013). Risk management is defined according to ISO 31000: 2018 Risk
management - guidelines as “coordinated activities of the organization with regard to risk”
(Tranchard, 2018). According to Hubbard (2009), risk management is the identification,
assessment and prioritization of risk, followed by coordinated and economic use of resources
to minimize, monitor and control the likelihood or impact of negative events. Risk management
in the enterprise is one of the important internal processes that increase its resilience to negative
environmental impacts, strengthens flexibility already in the prevention period and is necessary
to ensure process safety. Buganová (2012) describes project risk management as a systematic
use of policies, procedures and working techniques management and tasks dealing with
identifying, identifying, analyzing, evaluating, managing, monitoring and communicating risks.

2. ANALYSIS AND COMPARISON OF SELECTED STANDARDS AND

METHODOLOGIES FOCUSING ON PROJECT RISK MANAGEMENT PROCESS
Increasing the resilience of an organization on the negative effects of factors, whether external
or internal, can be achieved by implementing appropriate management tools and standards
(Buganová, 2012; Hollá, 2016). Project management has several standards through which it is
possible to effectively implement project management in enterprises. These standards differ in
the procedures, methods and tools used. The most used include:
x International Project Management Association (IPMA),
x Project Management Institute (PMI),
x PRINCE2,
x Active Threat and Opportunity Management (ATOM),
x Project Risk Analysis & Management (PRAM).

The IPMA standard is based on a competency-based approach to project management. It does

not focus on the precise definition of processes and their specific applications, but the skills and
experience of project managers. PMI is a professional association of enterprises and project
managers that creates and maintains the PMBOK standard. The parameters of the standard are
given in A guide to project management body of knowledge. According to the Project
Management Institute (2013), project management processes are divided into five main process
groups: the initiation, planning, implementation, monitoring and control and termination
process groups. In addition to the process groups, the standard consists of 10 knowledge areas,
which include, in addition to the knowledge areas already mentioned, the management of
project stakeholders. In the context of PRINCE2, the term methodology is used, because it is
more of a guide or a project development methodology. The PRINCE2 methodology is based
on three main elements: basic principles, themes and processes. The guiding principles include
(Bentley, 2010) the continuous merits of the investment, clearly defined roles and
responsibilities, product focus, staged management, exception management, learning from
experience, adapting PRINCE2 to the project environment. Korea's ATOM methodology
(2011) is designed for a simple risk management process that can be scaled and applied to all
processes in any industry, for any size and complexity of the project. PRAM risk management
methodology is designed to identify and assess risks. Table 1 lists the strengths and weaknesses
of the IPMA, PMBOK standards and the PRINCE2, ATOM, and PRAM methodologies.

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Table 1: Strengths and weaknesses of IPMA, PMBOK, PRINCE2, ATOM, PRAM

STRENGTHS
IPMA x Suitable for any sector.
x Accurate and clear definition of project
manager knowledge and skills.
x Defines different levels of project
manager from the most experienced to
the less experienced.
PMBOK x Suitable for various industries and
organizations operating worldwide.
x Focuses on project management
processes.
x Generally conceived enough to be
applicable to any project.
x It is used as a global guide to project
management, on which the next
concept of project management is
based.
PRINCE2 x Applicable to any type of project.
x The detailed method with its glossary.
x Combines with other project
management models.
ATOM x Possibility to change the scope
according to the size and complexity of
the project.
x Quantitative risk analysis for large and
complex projects.
x Simplifying steps for small projects.
PRAM x Project risks can be actively managed
to improve project performance
compared to its key objectives.
x Can be used for all projects, regardless
of industry, regardless of schedule or
budget.
x Comparison of different risk responses
and strategies.
Source: based on Máchal, 2015
WEAKNESSES
x Uses only basic project management
terminology.
x It does not elaborate, often merely lists
the basic methods and techniques of
project management.
x There is no detailed focus on
individual project management
methods and tasks.
x It is a project management concept; it
does not provide clear guidance
(method) on how to manage projects.
x It does not deal with specific practical
examples of the use of project
management tools and techniques.
x Does not understand project
management comprehensively, does
not provide answers to all questions.
x It does not include project
management methods, techniques, and
project manager skills.
x The PRINCE2 methodology setting
shows a great administrative burden.
x For a simple risk management process.
x Missing risk owner assignment.
x Missing phase in the risk management
process to monitor the change.
x The time it takes to conduct a risk
analysis depends partly on the
availability of the information.
x The need for highly professional
knowledge.
x Complex separation of the costs of its
implementation from overheads.

The IPMA standard is based on a project management competence concept. Its strengths
include suitability for any sector. IPMA defines the knowledge and competencies of the project
manager, and determines the different levels of project managers. The weakness of the IPMA
standard can be seen as a focus on listing basic methods and project management techniques
rather than elaborating them. The PMBOK standard perceives project management
procedurally. A general understanding of the project allows an application to various projects
around the world. The standard serves as the World Project Management Guide. The PMBOK
standard is a project management concept, it does not provide clear guidance on project

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management. Shortcomings include the lack of practical examples of the use of project
management tools and techniques. The strength of PRINCE2 methodology is its ability to apply
to any project. The methodology is process-oriented, it presents the project processing
instructions and elaborates on the project terminology in detail. Unlike IPMA, it does not deal
with the competencies of a project manager. The weakness of the methodology is that it does
not include project management methods and techniques. The PRINCE2 methodology lacks
more comprehensive project management and at the same time it can entail a considerable
administrative burden. The content of the risk management process may vary depending on the
organization's project management standards used. In the ATOM methodology, the strengths
include simplifying steps for small projects that may lack a risk owner allocation. ATOM is
designed for simple risk management processes, it does not have to deal with complicated risks.
The big advantage is the possibility to change the scope according to the size and complexity
of the project. The advantage of PRAM is the possibility to apply the methodology to all
projects regardless of industry or industry and regardless of timetable or budget. High expertise
is needed and complications can make it difficult to separate the cost of its execution from
overhead costs. Project risk management is an integral and essential component of project
management. It is necessary to evaluate each project separately in terms of risks, as it can bring
specific risks. The most commonly used standards for implementing the risk management
process in projects using any project management standard are (Buganová, 2019; Hudáková,
2018):
x ISO 21500: 2012 Guidance on project management.
x IEC 62198: 2013 Risk Management in Project - Application Guidelines. This standard is
an update to ISO / IEC 62198: 2002, Project Risk Management - Application Guidelines.
x ISO 31000: 2018 Risk management - guidelines, which is an update to ISO 31000: 2009
Risk management - Principles and guidelines.
x STN ISO 31000: 2019 Risk management. This standard is the Slovak translation of the
standard ISO 31000: 2018 Risk management - guidelines.
x ISO / IEC 16085: 2006 Systems and Software Engineering - Life Cycle Processes - Risk
Management.
x ISO 10006: 2003 Quality management systems - Guidelines for quality management in
projects.
x ISO 9001: 2015 Quality management systems - Requirements, that more fully elaborate the
requirement to implement risk management.
x ISO / IEC Guide 73: 2009 Risk Management - Vocabulary.

Project management and risk management standards should be interrelated and form a compact
whole in project management. The applied risk management standard should support the
application of the standard for project management and increase its effectiveness in achieving
the project objectives as well as managing the project portfolio within the organization.

3. CONCLUSION
Project risk management must be designed in the pre-project phase of the project life cycle. A
feasibility study is one of the prevention tools that can effectively point out the riskiness of the
project. It is precisely here that there is scope to determine whether or not a project in terms of
risk is feasible If we look at projects from a different point of view, namely from unsuccessful
projects, which are statistically more numerous, we find that one of the most frequent and main
factors that cause a project supply failure is in particular incorrect or insufficient project risk
management. This is where the implementation of appropriate project management and risk
management standards can provide support. Each enterprise starts with the choice of a suitable
standard based on its capabilities, procedures, needs and resources.

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The needs of stakeholders are often also to be taken into account. Effectively implemented
project management with implemented risk management that provides adequate support to
address the negative aspects of development, whether external or internal, affecting the business
will not only increase business competitiveness, but also increase overall business resilience
and reduce the cost of losses. However, it is a prerequisite that managers with sufficient
knowledge and knowledge must be able to implement and implement these standards at an
appropriate level of expertise and deliver the expected results.

ACKNOWLEDGEMENT: Publication of this paper was supported by Cultural and

Educational Grant Agency of the Ministry of Education, Science, Research and Sport of the
Slovak Republic – 026ŽU-4/2020 KEGA Innovation and internationalization of teaching as a
tool to improve the quality of education at FBI UNIZA and internal grant scheme of the Faculty
of Security Engineering of the University of Žilina from grant no. 201904.

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