Report writing 674

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Contemporary Approaches in Management of Risk in Engineering Organizations

Assignment-1

Literature review

Student name: Hari Kiran Penumudi

student id: 217473484

Table of Contents

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INTRODUCTION………………………………………………………………………3-4

OBJECTIVES & DELIVERABLES…………………………………………………....4

REVIEW OF LITERATURE…………………………………………………………....5-13

Risk and Risk Management………………………………………………………5-6

Risk Management Frameworks……………………………………………….....6-10

Importance of Risk Management in Engineering………………………….........10-13

GENERAL PROBLEM STATEMENT…………………………………………………13-14

RESEARH STRATEGY…………………………………………………………………14-15

RESOURCES REQUIREMENTS……………………………………………………….16

PROJECT PLANNING…………………………………………………………………..16

REFERNCES…………………………………………………………………………….17-19

Contemporary Approaches in Management of Risk in Engineering Organizations

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Introduction

The term, ‘risk’ as defined by the Oxford English dictionary is a possibility to meet with any

kind of danger or suffer harm. Risk is a serious issue that every organization has to deal with in

their everyday operations. However, nature and magnitude of risks largely vary from

organization to organization and often depend on the type of the organization. Therefore,

organizations irrespective of their type of operations keep a risk management team that looks

after every risk to which an organization is vulnerable. Organizations in the field of engineering

also have to come across some inherent risks that negatively impact their operations. Engineering

may be defined as the process of applying science to practical purposes of designing structures,

systems, machines and similar things. Therefore, like every other organization, risk assessment

and management is also an integral part of engineering organizations. Since the task of

engineering is mostly complex, the risks in this area are also very complicated. If risks in

engineering field are not mitigated effectively it may produce long-term danger that may affect

both the organizational services and the society in whole. Hence, the activity of risk management

within engineering organizations must be undertaken seriously and measured thoroughly in order

to reduce the threat of risks. Amyotte et al., (2006) simply puts it like within the engineering

practice, an inbuilt risk is always present. Studies have found that despite the knowledge of

inherent risks within the field and activity of engineering, organizations are not very aware in

imparting knowledge about risk management to their engineers. From this the need of education

regarding the risk management approaches arises. Therefore, this paper tries to find out

approaches to management of risks and importance of these approaches within the area of

engineering. Bringing on the contemporary evidence from the literature review related to risk

management approaches, the paper examines how those approaches can be helpful for

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engineering organizations. Moreover, the paper puts focus into why risks must be mitigated in

order to bring the operational success. The paper tries to develop a theoretical framework of risk

management practices that have paramount value based on literature review and then proposes a

risk management framework for educational purposes.

Objectives and Deliverables

In order to examine the necessity of risk management, contemporary approaches to risk

management, and importance of these approaches within the area of engineering, the paper

frames out two significant research questions based on which the objectives of this study has

been developed. The two research questions are:

i) Why risk management is important for engineering organizations?

ii) What approaches to risk management should be taken by engineering organizations?

The first question, “Why risk management is important for engineering organizations?”tries to

examine the importance of risk management within the field of engineering. The argument is

made in support of the knowledge and necessity of risk management as an important factor for

all engineers as a part of their duty. Based on the findings of literature review, the importance of

management of risks for engineers is set on three directions: moral, legal, and financial.

The second question, “What approaches to risk management should be taken by engineering

organizations?” argues that engineers irrespective of their operational difficulties should have

risk management knowledge. The risk management should not be limited to only engineers, who

have high-risk duties but the whole organization should take approaches toward managing risks.

Among several discussed approaches, risk communication has given a particular attention.

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Review of Literature

The first section of the literature review part provides an overview of existing knowledge and

identifies the gaps. Based on a methodical and in-depth review of available literature, this section

presents an overview of the existing knowledge-base relating to the risk management approaches

within the field of engineering. Besides providing a review of the important concepts pertaining

to the study, it will also demonstrate a review of the key findings of relevant research projects

that have already been accomplished locally and internationally.

Risk and Risk Management

The term risk as defined by Amoyette et al., (2006) is the possibility of loss, harm, or any kind

negative consequences arising out of a hazard. The importance of risk involves both the

possibility of an unwanted condition and the severity of its outcome. This definition of risks

brings up three significant features of risk that organizations could face. They are: a) risk is an

outcome of an unidentified hazard; b) risk can arise in four major areas- people, environment,

assets, and production; and c) risk has two aspects- probability and severity. Gandhi (2010) finds

out nine major constituents of systematic risks, which includes schedule, technical, financial,

vendor, culture, reputation, intellectual property, compliance, and quality.

The definition of Risk management as put by Amoyette et al., (2006) involves the entire process

of understanding a risk, assessment of a risk, decision-making to control the risk effectively etc.

and they must be implemented in a proper way. The first step towards the risk management is

active identification of prospective hazards. Effective hazard identification leads to a proper

management of those risks in order to turn them acceptable. This definition is developed based

on the functional definition of risk management from the study of Wilson & McCutcheon,

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(2003). In relation with this definition, the cycle of risk management-risk analysis, risk

assessment, and risk management- as presented by Bird & Germain (1996) is established again.

In the area of engineering, organizations should also analyze the risk at first to know the risk

probability and consequences, and then should assess the risk in order to take proper risk

management method.

Risk Management Frameworks

Amoyette et al., (2006) in their risk management framework have presented the following risk

management approach, which represents best practices within organizations across the world.

The steps in their risk management framework are:

i) Planned Reviews: This step that usually includes functions such as, investigation of

incidents, reviews of insurance company, reviews of regulatory activities

(environmental reporting, inspection of pressure vessels, renewal needs of assets, law

changes, code updates etc.) is generally conduced to obtain necessary information to

monitor organizational operations and develop new designs for projects accordingly.

ii) Hazards Identification: By utilizing various hazard identification tools, such as

Hazard and Operability Study (HAZOP), Hazard Checklists (HCI), What-if-Analysis,

Fault Tree Analysis (FTA) etc. the management team needs to determine factors by

means of risk analysis.

iii) Risk Assessment/Analysis: Risk analysis is necessary to gain insight into the

components of risk- risk probability and risk consequences. While probability of risks

is related to failure of system, human resources, or environment etc., consequences of

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risks related to engineering services are mainly thermal radiation, smoke, explosions,

toxic exposure, environmental pollution, lethality, toxic cloud dispersion etc.

iv) Acceptability of Risk: According to the study of Amoyette et al., (2006) the risk

acceptability can be measured depending on the level of risks- low-level risks, which

are acceptable; medium-level-risks, which are acceptable only after certain

modifications; and high-level-risks, which are unacceptable. This is also found in

Kathryn Bingham’ (2012) report that focuses on general contemporary approaches to

risk management.

v) The Residual Risk Manage: An acceptable risk must be managed in order to

prevent undesirable effects Safety management such as, health and occupational

safety, process safety, equipment reliability etc. is one key tool to manage such risks.

(Amoyette et al., 2006).

vi) Risk Reduction: An unacceptable risk can often be reduced to acceptable level by

employing such techniques like further control, protective features etc. However, in

cases of engineering organizations, they may often face increased operational risks

due to the changes made.

vii) Discontinuation of Activity: If the risk is too high to take, the management of

engineering organizations must discontinue an activity in standard of engineering

ethics.

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Source: Amoyette et al., 2006

Mohamed Noordin Yusuff in his report presents four general approaches to risk management.

i) Risk Identification: This includes identifying both internal and external risks to any

project.

ii) Risk Quantification: This includes risk assessment and their connection to each other.

iii) Development of Risk Response: This step may include either of risk avoidance, risk

mitigation, or risk acceptance.

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iv) Control of Risk Response: This involves implementation of the risk management

plan.

Information technology (IT) is a significant field within the domain of engineering. Therefore,

upon successful accomplishment of IT projects and software management, the success of

engineering organizations largely depend. Therefore, risk management in this field is another

crucial direction.

Pimchangthong and Boonjing (2017) in their study developed research framework to examine

the effect of organizational factors (type and size of organizations) along with practices of risk

management (risk identification, analysis, response planning, and monitor and control) to the

success of IT projects. The study identified two essential factors- risk identification and risk

response planning- that largely influence the performance of process and success of IT projects.

The study found negative effect of risk analysis on the performance of product.

Lytinen et al., (1995) set a framework for risk management in software. There are three levels of

software development environment- management environment, project environment and system

environment. At each level of the setting there are separate set of technology, task, actors, and

structures. The three environments are two-directional connected by risk-based management

process and development process. This model shows that the three distinct set of socio-technical

system are directly entwined by the above-mentioned two change processes that have common

bounded rationality (Lytinene et al., 1995).

Another study of Almeida et al., (2015), found that engineering risks at each stage of any

undertaken project are needed to be properly managed in order to fulfill specified performance-

based obligations. This can only be conveyed through demonstration of statement of technical

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conformity, such as presenting reports of technical risks, or performance certificate of risks in

order to formulate informed decisions. The authors propose to utilize the risk management

framework throughout all phases of planning, programming, designing, constructing, and

building projects.

The study of Giradi et al., (2017) offers insight into the risk factors and their management related

to infrastructure projects. The findings of study suggest that although the risk factors influence

the performance of projects, it is depended on the intensity level of risk management. However,

it does not vary with increasing complexity of the projects. The study of Ibbs & Kwak (2000)

found out that since risk factors identification is the most critical part of infrastructure projects, it

may provide negative reflexes to the performance of the projects if not well managed (Shenhar et

al., 2005; Zwikael & Ahn, 2011).

MITRE recognizes that for enterprise engineering programs, risk management is necessary. it

help the decision makers to gain an enterprise-across understanding of various risks, their

possible outcomes, their interdependencies, and waving impact within the enterprise and beyond

it (MTRE).

Importance of Risk Management in Engineering

Engineers have to manage a wide variety of projects and therefore, generally they have to take

part in risk management activities related to those projects. So, risk management is an inherent

part of an engineer’s knowledge base. Apart from this, as Amoyette et al., (2006) suggested in

their studies are following:

i) Moral Direction: Since the primary objectives of all engineering projects is to

maintain the well-being of public, the risk related to each level of any project must be

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well-managed in order to maintain organizational cultural approach to safety

(Hopkins, 2005). The need of ethical risk management education is also recognized

by Guntzburger et al. (2017) in order to advance the progressive change. Moral

evaluation of risk management in engineering profession is also studied by Colleen et

al., (2011) and sets criteria for scientific hypothesis evaluation.

ii) Legal Direction: Due to the factor of large scale of associated industrial hazards, the

engineering organizations must be bound with legal obligations and they must abide

by the legal requirements in order to avoid legal risks of any kind.

iii) Financial Direction: Financial motivation for risk management involves elements of

self-determination, major loss avoidance, corporate responsibility and value.

iv) Educational Needs: The need of education of risk management for engineers arises

out of the three above-mentioned directions. Engineering organization should take

special care in educating their in-job or trainee engineers about the risk management.

ABET (2012) makes recommendation for systematic risk management to be made for

accreditation.

The study of Amoyette et al., (2006) focused on another very significant side that is risk

management education for all engineers irrespective of their disciplines. As engineers are often

need to work as a team for a successful completion of any project, and the team comprises of

engineers coming from different fields, they all have to learn about the hazards and risks

associated with their tasks.

Although risk-management is a crucial part of responsibility for all engineering organizations,

there is not very vast area of knowledge related to this field. A few researches have put light into

creating risk-management frameworks; there is a lack of general approaches to it. Moreover, the

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body of literature lacks an approach to educate engineers about the risk management process.

The study of Gandhi & Gorod (2012) signifies the lack of a systematic risk management

education within engineering organizations which often results into the failure of large projects

that have serious social, economical, environmental consequences.

The study of Djaferis (2004) finds out that in addressing systematic risks engineering education

for the most part lacks proper directional support and there is a lack of multidiscipline as they do

not give enough attention to integration of knowledge and risk management. In their systematic

literature investigation of risk management of product development projects

Ahmed et al., (2007) suggests that a further risk focused approach will likely result into an

integration of numerous risk-management techniques that will in turn increase the effectiveness

of outcome.

The project report of Koutha (2010) puts focus into the significance of risk management

knowledge including methodologies, tools, practices etc. due to the increasing number of

software projects.

The second section of this literature review part provides an overview of existing methodologies

and experimental designs applied to the relevant research projects that have been conducted

previously.

Most of the literature in this field is developed based on previous knowledge and case studies

associated with that knowledge. Depending on these two methods, some researchers have built

their own experimental risk-management frameworks. These frameworks are helpful to gain

perspective on how risk management is taken within the particular discipline of engineering. The

case studies conducted to this approach are helpful to understand what organizations are

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necessarily applying in their risk management direction. Moreover, the simulation based studies

are helpful to set a model of problems in order to teach about the problem. The study of Gandhi

& Gorod is based on the literature review that includes survey distribution to faculty of

engineering management programs to assess courses, offered by the U.S on risk management.

The qualitative researches in this field present an understanding of opinions, reasons, and

motivations related to risk-management, while the quantitative analysis found in some of

literature takes a systematic approach towards investigation of problems in project management

in engineering. However, the methodologies lack to set a form of framework needed to educate

engineers about the risk management requirements. In order to fill this gap, the present study

takes an approach to set a framework for the education of risk-management within engineering

field.

General Problem Statement

Although depending on discipline of engineering, risks may vary from organization to

organization, there is a lack of general approach that should be taken into the field of

engineering. The risk-management within the engineering organizations should not be limited to

risk-management team or senior leadership, but every engineer should have knowledge of the

potential hazards. The importance of risk management education for engineers is not largely

covered by potential literature. Therefore, there lies a limitation in the approach toward the risk

management. This limitation has its own concerns. Without a proper knowledge of risk

management, engineers will not successfully accomplish any task. Therefore, to fulfill this

knowledge gap, this study looks for a general approach of risk management that should be taken

by all engineering organizations. This approach will identify the need of risk management

training and education for all engineers besides including a general framework to risk

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management. Continuous training regarding hazard identification, assessment, planning,

managing, response, outcome determination etc. should be taken place within engineering

organizations. The general approach of every engineering organization should be to tackle those

risks with a well-grounded risk management approach that will not include strategies of risk

management only, but also emphasize on the need of education of the risk management.

Research Strategy

This section presents a framework that outlines the steps in which the proposed research project

will be carried out to achieve the research objectives. First of all, the research strategy applied to

this study is descriptive (Gill, 2011), qualitative (Yin, 2015), and inductive (Martins &

Theophilo, 2009). The methodological path developed for this research follows the following

direction: a) exploration of study topic, research objectives based on the development of research

questions, b) elaboration of existing literature in this field related to the topic and finding out the

literature gap in order to put more focus into it, c) development of the theoretical framework of

the study based on the literature review. This paper is mainly developed to review existing

literature in management techniques of risks in order to find out their applicability to various

processes of managing risks such as, context set-up, risk identification, risk analysis and

treatment.

Based on the existing literature, the present study will try to find out relevant data in the field and

utilize that data and information in order to develop both the theoretical framework of risk

management approaches as well as set a model for risk management education framework.

As demonstrated earlier that this study aims to answer two major research questions: Why risk

management is important for engineering organizations? And what approaches to risk

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management should be taken by engineering organizations? Consequently, the main objective of

the study evolves from these questions; that is to gain better understanding to risk management

framework that organizations can apply to educate their engineers about the risks. To this end,

three particular objectives have been pursued: i) determine the existence of risk factors and their

relationship to performance, and ii) significance of risk management education and their positive

influence.

For this research, the literature review, chosen across different disciplines within the engineering

field in order to gain better insight how different engineering organizations manage and control

their risks. The researchers mainly include a wide variety of studies from peer-reviewed

engineering journals or professional engineering body, or individual authors, who have put their

own opinions into the matter. They are mainly searched through search engine across different

websites and journal publishers. The sources are mainly utilized to establish research studies for

a confirmation on division between industry and academic institutes in this field of engineering

risk management and to set up successful course design and methodology development that will

enhance the usefulness of the course objectives. A wide variety of researches helps to indicate

how the research processes have been conducted earlier. This understanding helps to find out the

lack in literature as well as develop the strategy for the present research.

After the development of risk management framework associated with the topic, the study will

emphasize on the significance of applying the framework with engineering organizations. This

will be conducted again through a descriptive way, putting recommendations for the application.

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Resource Requirements

The project does not need much external resources like lab equipments or other such things. The

study is mainly depended on secondary sources. Based on the available data and information of

literature and existing knowledge in this field, the project has been developed. The study

supports the existing resources.

However, to find out the significance of the application of proposed framework further external

assistance may be needed, but this does not fall within the scope of this study. This must be

investigated through further researches.

The cost of the project is also within the budget. It is not too much as it needs only a little

expense.

Project Planning

The proposed tasks in order should be presented in timelines for accomplishing the research

activities and project deliverables. The planning of the project involves:

 Existing literature search and sorting out relevant studies. This should take one day.

 Making the theoretical analysis of relevant information and developing the theoretical

part of the study. This should take one to two days.

 Developing risk management education framework based on existing and new

knowledge. This may take a few hours.

 Presenting other relevant parts of the project. This will take another few hours.

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