Practices for Implementing Risk Management in the Project Network

Mechanism category


Mechanisms in the case project

Application of the mechanisms in the case project

The implications of the employed mechanisms and fitness with the contextual situation

Formal information processing mechanisms

Rules and regulations

Established rules and criteria for the selection of subcontractors at a global level.

Company rules for the selection of subcontractors were not strictly followed (e.g. financial situation of the potential subcontractors was not checked thoroughly before signing the contract). In addition, the turnkey contractor had to select one main subcontractor as a part of the contract with the end customer, hence the evaluation of the main subcontractor was incomplete.

The subcontractors had to carry the risk of financing the project when the turnkey contractor delayed their payments. In the unknown environment, the turnkey contractor was not aware of the behavior of the subcontractors. The weak financial situation of the subcontractors caused a delay in the project. If strictly followed, rules and criteria would have been suitable mechanisms to reduce uncertainty but rules and criteria would also have some weaknesses related to the situations of high equivocality due to the complex project network and unstable project environment.

Specification of responsibilities in the contract.

Rules were not strictly followed and therefore there were no clearly specified responsibilities in the contract.

When a dispute occurred, it was not possible to refer to the contract due to it not clearly specifying responsibilities. Project parties had to negotiate the responsibilities again. Standard rules would have been a comprehensive practice to avoid risk related to the lack of information in terms of specification.

Formal risk sheet.

Risk sheets were used for (1) evaluation of the subcontractors’ capability before subcontractor selection (the second ground of subcontractor selection after the project was delayed) and (2) identification and evaluation of risks of the project during the sales phase and in the project execution phase.

The selected subcontractors had the manpower to fulfill their obligations. Some risks were identified and managed well with the formal risk sheets. The delay caused by the prolonged permitting process was not identified as a risk during the sales phase or the project execution phase. Company rules were not strictly followed in terms of regular updating of the risk sheet during the project phase. The formal risk sheet was an appropriate practice which reduced uncertainty but it also had some weaknesses related to high equivocality due to the complex project network and unstable project environment.

Formal information systems

Progress follow-up tool.

The actual progress of the turnkey contractor was followed-up with a formal tool.

The turnkey contractor was able to follow-up the actual progress of its entire project scope. The formal follow-up tool was a comprehensive/appropriate practice to gather information and reduce uncertainty. However, the usability of the tool requires that rules are strictly followed in terms of accuracy of the information.

Database for project information.

Project data was available in the global database for employees of the turnkey contractor.

The project database was a suitable practice to gather information and reduce uncertainty.

Special reports

Customer reporting system.

The end customer had access to the turnkey contractor’s progress follow-up tool.

The end customer was able to review the status of the turnkey contractor’s entire project scope by having access to the same follow-up tool which the turnkey contractor used. This was a comprehensive approach for reporting purpose and to reduce uncertainty.