Understanding and mitigating IT project risks.

• Author: Bailey, Mike
• Position: Information technology

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Technology projects can present organizational challenges, and the associated risk is one of the finance officers primary concerns about such projects. At a minimum, finance officers should understand the organizational risks presented. However, it is often in the best interest of the organization to have its finance officer play a larger role--more than just a risk management role--in the success of a technology project.

Risks are inherent in essentially all technology projects. Beyond risk management, though, some projects directly affect the operations of the finance function. Examples such as financial systems, enterprise resource planning (ERP) projects, and the internal controls built into business process systems (e.g., recreation registration, development permit administration) will have a direct impact on the business processes of the finance function.

This article focuses on strategies and tactics for mitigating the more subtle risks to the success of a technology project in achieving its intended results for your organization. It will focus on examining ways the organizational finance officer can contribute to the success of such projects.

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IDENTIFYING RISK

Three primary areas of risk accompany any IT project: planning risk, technology-related risk, and people risk. Planning risks are all related to project management exercises. Examples include the expertise of the proposed project manager, the current and future political landscape, the reliability of the project budget and funding, the potential for process reengineering, managing user expectations, how well change is managed, and scope creep. Technology-related risks relate to the hardware, software, and network infrastructure that is required in an IT project. Examples of risk in the technology area include new hardware purchase requirements, virtualization possibilities, disaster recovery, ease of system use, technology support, ongoing system maintenance, and network bandwidth requirements. Finally, people-related risks are a major component of any technology implementation. People risks include internal versus external project staffing resources, identifying subject matter experts, and competing projects that could affect implementation staff time. While these are three distinct risk areas, they are not mutually exclusive (as shown in Exhibit 1).

LEADERSHIP

A key to success in any significant undertaking is strong and consistent leadership, and this is frequently a role of the organization's finance officer. Problems in technology projects often come from leadership gaps such as a lack of clear support within the organization, expansion of (or lack of control over) the scope once the concept is commenced, or a lack of focus on deadlines. Many IT risks can be mitigated at the outset by clearly assigning the leadership responsibility (often called project sponsorship) to someone who possesses the skills and the organizational role to direct the project to a successful conclusion.

The project sponsor will essentially be responsible for realizing the benefits that led the organization to take on the effort in the first place. That leader will need the vision to realize how a well-executed project will transform the organization and then lead the project...