Major Risks
Question
Scenario - A central government department, the Ministry of Food Hygiene (MFH), faces increasing pressure to cut costs, better manage suppliers performance and reduce the confusion caused by inadequate internal controls, outdated standards and outdated technology.
External consultants were employed to conduct a feasibility study to identify options to address the problems, and the likely costs and benefits.
The following options were considered:Do nothing.Re-engineer selected business functions.Outsource selected business functions.
The feasibility study concluded that there was a case for outsourcing the MFH Information Technology Division and the Facilities Division (maintenance of buildings and grounds)
The recommendations were:One service provider should be contracted to provide the services currently provided by the Information Technology Division and the Facilities Division.A 10-year service contract should be agreed with the selected service provider.
The feasibility study developed high-level designs of the current organization, processes, systems and operating models, plus an outline Business Case for the required project.
The external consultants also made the following recommendations for the management of the project:Use PRINCE2.Set up the project with 4 management stages: Stage 1
Standard PRINCE2 initiation activities.
Stage 2
Create detailed designs (future organization, processes, systems and operating models) and the service level agreement between MFH and the future service provider.
Stage 3
Request and evaluate proposals, select service provider and agree contract.
Stage 4
Transfer equipment and staff, transfer responsibility for service provision and run trial period.
Initial estimates indicated that the project would cost 2.5m and take two years to complete.
MFH senior management agreed that there was a case for outsourcing, and accepted the recommendations as a basis for the project.
There is an expected saving of 20m over 10 years.
The Outsourcing project has completed the Starting up a Project process and is now in the initiation stage.
Because of the strategic importance of the project, the MFH Chief Executive Officer has taken the role of Executive.
A PRINCE2-experienced Project Manager has been appointed from within MFH.
Staff within the business functions being outsourced will work with the external consultants who conducted the feasibility study to define the detailed designs.
Which 2 statements should be recorded under the Major risks heading?
Answers
Explanations
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A. B. C. D. E.BD.
Based on the scenario provided, the MFH is facing increasing pressure to cut costs, better manage supplier performance, and reduce confusion caused by inadequate internal controls, outdated standards, and outdated technology. External consultants were employed to conduct a feasibility study to identify options to address the problems, and the likely costs and benefits.
The feasibility study concluded that outsourcing the MFH Information Technology Division and the Facilities Division would be a viable option. The external consultants also made recommendations for the management of the project, which includes using PRINCE2 and setting up the project with four management stages.
The project has completed the Starting up a Project process and is now in the initiation stage. The Chief Executive Officer of the MFH has taken the role of Executive, and a PRINCE2-experienced Project Manager has been appointed from within the organization. Staff within the business functions being outsourced will work with the external consultants to define the detailed designs.
Under the Major risks heading, the two statements that should be recorded are:
A. Due to market conditions, a suitable service provider may not be found, possibly leading to premature closure of the project. B. Owing to employment contract changes, staff may resist outsourcing, which would make it difficult to transfer staff to the selected service provider.
Explanation:
A. Due to market conditions, a suitable service provider may not be found, possibly leading to premature closure of the project. This is a major risk because if a suitable service provider cannot be found, the project may not be able to achieve its objectives. This may lead to premature closure of the project, which can result in wasted resources and costs. It is essential to conduct market research and ensure that suitable service providers are available before proceeding with the project.
B. Owing to employment contract changes, staff may resist outsourcing, which would make it difficult to transfer staff to the selected service provider. This is a major risk because if the staff resist outsourcing, it can cause delays in the transfer of staff to the selected service provider. This can impact the project schedule and increase costs. It is important to communicate the benefits of outsourcing to the staff and address their concerns to ensure a smooth transfer of staff to the selected service provider.
C. MFH's operations may be reduced and the 10-year contract may not achieve its estimated value of £20m, which would reduce the service provider's profit. This is not a major risk as the estimated value of the contract is not a significant risk to the project. Moreover, reducing the service provider's profit does not impact the project's objectives.
D. The initial estimates taken from the feasibility study report indicate that the project will take two years to complete, which means that the business problems would remain for this period. This is not a major risk as the duration of the project is already estimated in the feasibility study. However, it is important to ensure that the project is completed within the estimated time frame to achieve the project's objectives.
E. The management stages recommended by the consultants may not be appropriate, resulting in confusion in planning. This is not a major risk as the management stages are recommended by external consultants who are experienced in managing similar projects. However, it is important to review and validate the management stages to ensure that they are appropriate for the project.
