Risk Management of a New Office Site of J&S Appraisal Company

MPM344-1604B-01-Controlling Project Risk

Jennifer Haggy

Colorado Technical University

December 13, 2016

Table of Contents

Introduction & Project Outline

WBS

Risk Management Justification

Effective companies

Approved stakeholders

For the success of the company

Flow Diagram

Project Risks Identification

List of Stakeholders

Project Risk of Starting a New Business Outside the Home

Risk Identification Techniques

Brainstorming

SWOT analysis

Cause and effect diagram (Fishbone Diagram)

SWOT Analysis

Project Risks Assessment

Risk Scoring Matrix

2x2 risk matrix approach

Project Risks Responses Strategy

Project risk response procedures

Effective risk management plan

Project Risks Monitoring and Control Plan

Risk Responsibility Plan

RASI Chart – Risk responsibility Plan

Project Risk Monitoring Plan

Risk Monitoring - Review Plan

Risk Monitoring – Technique / Method

Project Risk Controlling Plan

Diagram Flowchart

TBD

Conclusion

References

Introduction & Project Outline

The fundamental objective of this proposal is to give J&S Appraisal Company the opportunity for growth, we are a small and upcoming appraisal company with the unique ability to give our clients what they are looking for in a company in the means of residential appraisal services. What makes us better than “ABC Appraisals” down the street? We provide more than just a utility, we provide a lifelong relationship. The purpose of this proposal is to provide a breakdown and benefits as well as potential risks of combining current home office space into new building office space. Currently we are working out of our home offices, which has its benefits; however, also has drawbacks. Our proposal is to consider moving into new office building space and in turn expanding our small business for future profit.

This project management is atechnique that guarantees the levels of vulnerability and risk are properly supervised. A risk management can be named as a continuous procedure for the duration of the life of the project; while this process is referred to as a calculation and evaluation of financial risks together with the recognition of procedures to prevent or reduce their impact.

In the Appraisal Industry, there are many risk and liabilities to an appraiser working within the field. Along with the physical risk of the move there are the risks of rules and regulations that are set forth at both state and federal levels; therefore, getting it right the first time is vital to the success of the company. As an independent appraisal company, there are several steps to be taken to avoid potential harmful risks; these steps are set forth as: Quality Control (QC), with new rules and regulations changing rapidly it is important to keep up with these changes; such as the new Uniform Appraisal Dataset (UAD). When an appraisal company makes a physical move, there are steps that must be taken with the state before that move can be made such as: a change of business address form must be filled out and should be submitted within 30 days, failure to do so is considered misconduct and can result in license revocation and or fine (Petit, 2011).

Next there is being ready for chance and the acceptance of change, the new expenses that go along with the new building that were not with the home office expenses are something that need to be considered. Hiring of new office help to manage such dialing task; such as; phones, filing and day-to-day office duties. Moreover, the states have executed programs for licensing and tracking appraisal companies. With the heavily relied upon software use in the industry, it is critical that all stakeholders can read and use this software to stay in compliance; thus, the purchase of this updated equipment may be necessary once the move has begun. Next there are certain deliverables that will need to be purchased for the success of the project; computers, desks and office chairs, phones, internets service, rent of office space, electric, gas and water budget, paper and office supplies.

Last, recognizing when something goes wrong; no one is perfect and the threat of something going wrong is inevitable. How we handle this threat is up to management and those involved in the process. Not all risks are as serious as the other; however, they all should be handled in the same amount of care. The smallest risk can lead to a larger obstacle making the need for a Risk Management Strategy and Plan to be in place.

WBS

Risk Management Justification

Effective companies are separated from the others by their capacity to oversee critical dangers adequately. Therefore, it is key for each company to manage a productive allocation of resources.

It has been approved that stakeholders acquire confidence when a company establishes and maintains a risk management process. To improve the procedure, it is important to distinguish and record basic and conceivable risks that are probably going to bring about an effect to the company, then survey how they will be overseen on the off chance that they occur, lastly identify the opportunities and exposures and develop a clear action plan demonstrating how the exposures should be handled and how the opportunities should be exploited.

For the success of the company, it must perceive that risk represents an opportunity in disguise that is unavoidable. There are 9 normal strides for legitimizing a project, paying little respect to the project’stype and size. The greater part of the steps utilizes a type of analysis. Regarding the process of justifying a project as an analysis that inspects and evaluates solutions, decides their parameters, (for example, cost, advantage, affect) and produces a report that summarizes the case for affirming the project. Below I clarify these nine stages.

1.Environmental Analysis: first we evaluate the business environment and the need for change and why this change is necessary. Building a profile of the business atmosphere will allow management to determine the current situation and make a prediction. This can be done through SWOT or PEST analysis.

2.Solution Proposal: the results of the environmental analysis will help clarify the areas in need for improvement. This is an attempt to propose change.

3.Alternatives Analysis: The need for changes has been determined; however, with the Alternative Analysis we can look at solutions that offer alternative ways for solving the problem.

4.Impact Analysis: How will this change affect the project; will it have a positive, negative or a neutral affect?

5.Cost-Benefit: with this analysis, it aids in recognizing what cost will the project require and what benefits will it have? The analysis can provide the stakeholders with cost-benefit support.

6. Financial Analysis: the objectives here are to create monetary and non-budgetary projections that figure out what cash and effort will be required to perform project and actualize the solution.

7. Risk Analysis: identifies and measures all potential risks. Determines which factors and possibilities impact the project results and in what degree.

8. Reporting: Project manager creates a summary of the project to determine its success and how effective it was or was not.

9. The final step in this process is Validation this is where the project manager needs to take a range of activities to perform a feasibility study that aims to give that the project viability in technical and economic terms.

There are five fundamental steps that describes the Risk Management Plan Process, they are as follows:

Risk Identification
What potential problems could happen with the new move
Risk Analyzation
How will these risks affect the project outcome?
Risk Rank
Which risks are serious enough to warrant action
Treatment of Risk
assess your highest ranked risks and set out a plan of action
Risk Review/monitor
monitor, track and review risks

Flow Diagram

Project Risks Identification

The objective of risk identificationproof is to recognize each possible risk, not to get rid of dangers from consideration or to generate answers for mitigating risks—those limits are finished through the risk evaluation and risk mitigation steps. A segment of the documentation and materials that should be used as a piece of risk identification as they get the opportunity to be available incorporate these:

Project justification and cost-effectiveness

WBS (Work Breakdown Structure)

Project performance specifications and technical specifications

Project schedule and milestones

Project cost estimate & benefits

Project financing, procurement & execution plan

Project rules & regulations that may be governed by regulators’ that could affect the project

The objective of risk managementproof is to maintain a strategic distance from oversights as well as to keep away from the inverse entanglement—of being occupied by variables that are not underlying drivers but rather just side effects. Treating the indications, as opposed to the main drivers, will give the presence of action yet won't understand the problem.

As stated in PMBOK, there are some specific tools and techniquesfor identifying risk they are as follows (Institute, 2013):

Documentation reviews
Information gathering techniques (Brainstorming & Root Cause Analysis)
Checklist analysis
Assumption analysis
Diagramming Techniques (cause and effect diagram & system and process flow chart)
SWOT analysis
Expert Judgement

List of Stakeholders

Another imperative part of the planning stageis picking your project team members. Selecting and picking up responsibility from the best members- whether directly employed or independent contractors, temporary workers, consultants, specialists or other partners- is pivotal to the nature of the project, and the simplicity with which you can oversee it. The stakeholders will be involved in my project will be the following (Piscopo, 2015);

Owners-maximize profit (Internal)
lenders/sponsors/suppliers- continue business for profit and receive appraisals (external)
creditors- creditors for whom we may owe money for the office project (external)
customers- clients for whom we do appraisals for (homeowners/external)
employees-want to stay employed and earn money(Internal)
landlord-for whom we owe rent for office space (external)
accountant – for whom does internal auditor for IRS and bookkeeping (Internal)
project manager-one who is overseeing any risks (Internal)

Once stakeholders are identified, next would be the assessment of the stakeholders’ importance and influence. Figuring out if stakeholders in a place of strong influence hold negative interests might be critical to project achievement. This level of comprehension can best be reached to by leading a formal evaluation of every stakeholder's level of significance and impact to the project.

Project Risk of Starting a New Business Outside the Home

While there will undoubtedly be, risks involved when our business is conceptualized, there are routes in which these risks can be minimized. It might be tempting to overlook risks identified with legal, financial, or staffing issues, yet it's ideal to know how to manage them, and how to avoid them so we don't confront issues later. Being that we are already an established company and are merging from home based offices to an already established office building looking at the project risks are a bit different. The following risk factors will be determined:(Scott, 2016)

Market Risk-Being an appraisal company market trends play an important role and pose a vital risk in business decisions.Housing market has its ups and downs; thus, taking on extra expenses is a risk alone.
Financial Risk-Money matters and moving from a home base to an office there will be new expenses to consider. Startup expenses such as; equipment, rent, utilities, employee, excess overhead, gas money. Overall expenses will increase; therefore, getting a budget plan together to determine P&L would be a smart business move.
Management Risk-Now two business owners/managers in charge could run the risk of hurting important business functions as well as the overall bottom line of the company. Since management is to see the day-to-day operations of the company, if management is ineffective they could have an adverse effect on the overall performance of the company.
Compliance Risk-Risks associated with compliance are those subject to legislative or state rules and regulations; as state appraisers, we are governed by these rules and must comply or risk of losing our license and fines.
Operational Risks- an internal risk or failure caused from people of the company or systems failure. With our business, be solely technology driven we run the risk of software/computer malfunction or power/internet outage. When something like this happens in a business such as ours; it can be crippling.
Competitive risk- is any competition within our field of expertise; rather it be current or new entry.
Political and economic risk- like with any business economical risks are a factor to consider. Is
Staff risk- Putting resources into that first staff member is regularly one of the greatest choices any independent company will take. Not just is there the money related duty of a normal month to month wage to pay – paying little mind to how the business has done that month – yet there are swathes of approaches and strategies that come with taking on employees. We are coming from a two-man operation to hiring an office manager and an accountant with future employees to considers. These are all risks factors.
Legal risks- Appraisers are scrutinized daily for their work being done; The real estate appraisal profession, as of late, has experienced enormous changes. The aftermath from the Subprime Mortgage/Financial Crisis of 2007-2008 and the Dodd-Frank enactment that followed left the profession in disarray. Although the aim of Dodd-Frank was, to a limited extent, to ensure the independence of the appraiser, it has done little to accomplish this objective (Russell, Santana, Sousa, Orman, Williams, Green, Smolen, n.d.)

Risk Identification Techniques

Brainstormingis a technique that can be used in all situations, this is a general exchanged of data was done between the stakeholders. Through means of meetings, emails correspondence between the partners helped with recognizing the potential dangers that may come about because of the project activities (Rawi, 2014). The meetings particularly demonstrated valuable as individuals could exchange thoughts among one another. With this gives further means of possibility to refine an individual's point of view consequently detecting the probable risk and a means to avoid this risk.

SWOT analysisis a very beneficial technique for problem solving. During this session stakeholders look at both internal and external strengths, weaknesses, opportunities and threats of the project. Strengths and weaknesses are internal analysis of how the project will do good or badly; whereas, opportunities and threats are external factors (Rawi, 2014). With the external factors a list was made of challenges and opportunities the project would face.

Cause and effect diagram (Fishbone Diagram)deems useful in visualizing the root causes of project problems. A visual analysis sometimes is more beneficial in getting the point across more so than a list of problems. This diagram is useful in identifying possible causes for a problem as well as helping get the thought process of all stakeholders out of a rut. Brainstorming is a combined technique that is used with the fishbone diagram; whereas, team members must brainstorm the root cause of the problem by asking the “why” questions. Wants this is established then the diagram can be started (Rawi, 2014)

SWOT Analysis

Helpful Harmful

to achieving the goals to achieving the goals

Strengths

Time in Industry
Staff we do have is well experienced
Most up-to-date appraisal software
Reputation within the community

/ Weaknesses

Lack of Staff
Turn times
Communication with Vendors/Clients
Time Management

Opportunities

Currently a Shortage of Appraisers
Rising need for Appraisers in Small Business

/ Threats

Larger Corporations
Government Restrictions
AMC Companies (appraisal management)
Economy
Legal Risks
Customer/Client Expectations

Internal strengths with the project being time and experience the owner/operators have making this a strength in the way of trust, confidence and security with clients and vendors. We assure our clients that we stay up-to-date with the most recent and cutting edge of appraisal software as well as internet security. However, with this project comes weaknesses such as the lack of staff we have which leads to time management in turn develops a lack of communication with vendors and clients and delay in turn times. As with any project external opportunities and threats must be taken into consideration; the opportunities outlined are the current shortage of appraisers within the industry due to stringent education requirements for new entry into the field. Threats; however, are with being a small company the consideration of larger corporations is a threat to our project and a risk that must be considered with the amount of new overhead being taken on by the stakeholders. Economy is a threat with the unforeseen market, one never knows how the market trend will be. As appraisers, there are legal risks of which are vital to our project success. Clients have legal rights; therefore, customer satisfaction is essential to success.