PJM410 Discussion Post Peer Responses
Please reply to both POST1: and POST2: in at least 250 words each
I have included the original post as reference.
We’ve talked about risk treatment and how the risk management plan
documents the actions needed when a risk becomes an issue, but where do
the contingency funds come from? Contingency planning is part of the
risk management planning process. Define contingency planning and
discuss when you would use it. Talk about the contingency planning
strategies for each type of risk.
Ayub, Thaheem, and Ullah (2019) state that contingency management is
frequently attributed as simply an estimation and collection of funds
during planning and budgeting. Instead, contingency management is the
exercise of managing residual risk and uncertainty (Ortiz, Pellicer,
& Molenaar, 2019). Contingency is essentially “Plan B” and can apply
in multiple ways. It should be used for any project where there is risk
that in doubt.
One way that it is applicable is to add additional resources to the
project either by adding more labor or money to the project to pay for
short comings or address an unseen risk. If there is a commercial or
external risk, having extra money in a contingency fund will help to
offset these costs as they arise. If there is a technical risk, paying
for additional needed technologies or related services can be addressed.
If there is a management risk, the plan could be to bring on additional
oversight for the project or to facilitate face to face meetings for
stakeholders if the project is geographically spread out.
Additionally, the contingency plan can act as a backup. In a
situation where it turns out that a technology is not ideal for use,
switching to a back up technology and integrating it could be needed and
addressed in the contingency plan.
Ayub, B., Thaheem, M. J., & Ullah, F. (2019). Contingency Release
During Project Execution: The Contractor’s Decision-Making Dilemma. Project Management Journal, 50, 734–748. doi: https://doi.org/10.1177/8756972819848250
Ortiz, J. I., Pellicer, E., & Molenaar, K. R. (2019). Determining Contingencies in the Management of Construction Projects. Project Management Journal, 50, 226–242. Retrieved from https://www.pmi.org/learning/library/determining-c…
Contingency planning is an integral component of disaster recovery,
risk management, and business continuity (Project Management Institute,
2017). It is a process that involves preparation to counter anything
that happens beyond the scope of regular operations in a business and
may negatively affect the ability of an organization to operate. Simply
stated, this planning involves being ready to counter risks. A
contingency plan is typically used in the management of exceptional
risks that may have disastrous impacts. A plan can be
department-specific or organization-wide. I would use this plan when
working at the department of information service of a company to create
an effective plan of recovery in case a disaster strike. Such a plan
would safeguard and restore company data such as instructional manuals,
hardware, and software components.
Contingency planning has three components, such as emergency
response, management of a crisis, and business continuity. A plan
involves different strategies. One technique involves creating a list of
different likely scenarios and ranking them in order of importance.
This technique would note the probability of various disasters
happening. The second strategy involves the determination of possible
internal sabotage by employees who are unhappy with organizational
processes. This strategy is essential since a quarter of interruptions
usually originate from internal sabotage. Securing critical servers and
creating an effective backup system mitigates the possibility of loss
in case of unauthorized access. By and large, strategies focus on areas
that can affect business infrastructure, people, and the reputation of a
business. Any strategy should follow the five steps of preparation,
analysis, development, implementation, and review of any process that
would address a risk. It is no doubt that putting the risk management
concepts into action is an ingredient for successful projects.
Therefore, a business must be innovative in finding methods that
ultimately achieve greater success in all projects (Bissonette, 2016).
Bissonette, M. (2016). Project risk management: A practical implementation approach. Newtown Square, Pennsylvania: Project Management Institute.
Project Management Institute. (2017). A guide to the project management body of knowledge: (PMBOK® guide) (6th ed.). Newtown Square, PA, USA: Project Management Institute.
POST2: (A question from the professor concerning my post)
Welcome to week seven and thank you for the engagement. Contingency
planning does have multiple components, one being budgeting for
contingency. When thinking about contingency planning, how does one
manage contingency costs on a project?
More specifically, how do you know how much money to allocate to contingency funds?