This should come as no surprise to the ERP project team heading into active evaluation, selection and ERP implementation.
Unlike a typical project team that might live through an ERP project once or twice a career, Ultra’s ERP consultants have successfully guided hundreds of manufacturers and distributors through the process of enterprise initiatives and offer a unique perspective on ERP risks that we consider a best practice in the industry.
ERP Risks: Ultra’s Insight
We’ve looked at the topic of risk in previous blog posts including this one entitled “Forming an ERP Risk Management Plan for Your Implementation Project.” We cover a lot of ground including distinguishing between risk analysis and risk management. Ultra also shares the key elements of an ERP risk management plan in a post “Forming an ERP Risk Management Plan for Your Implementation Project.”
Another timely post entitled “Tips for Managing Common ERP Risk Factors” summarizes how teams can be effective in reducing and mitigating common ERP risk factors.
An Awareness of ERP Risks
This blog post series puts the focus on key ERP risks that organizations can’t afford to ignore.
Why is this focus important? Because gaining an awareness of ERP risks and striving to embrace a proactive risk management stance will help teams take steps to address serious project and business issues in the future.
This first post looks at the six risk categories Ultra encounters most frequently. My next post will address additional risk categories for consideration.
Major ERP Risks
- Business Priorities and Leadership: These risks commonly arise due to changing business and leadership dynamics of the project. As an example, are competing priorities likely to necessitate resource reallocation? Will key team members and resources be pulled into another high priority enterprise-wide project? Can the organization handle existing workloads and operations without affecting the ERP project? These threats stemming from project organization, resource allocation, workload, and competing priorities must be addressed and require appropriate mitigation activities.
- Financial Budget and Value Realization: Many projects undertaken by manufacturing and distribution organizations carry risk related to the budget or financial expectations of the project. Risk typically stems from a lack of comprehensive scoping and budgeting for the project; insufficient assessments of tangible benefits and measurable targets that define investment expectations; changes in the project budget allocation; or unanticipated financial forecast changes. This risk category impacts confidence in realizing the business case and value priority of the project.
- Project Scope and Timeline: Here’s where that dreaded “scope creep” comes into play. ERP risk in this area comes from unexpected project scope changes such as unplanned business or process requirements; lack of appropriate scope details leading to assumptions and misunderstandings; or software modules/functionality that don’t deliver to the expectation and therefore require additional change, development, due-diligence, and more time. Changes to the original Work Plan including extensions or reductions of the project timeline also increase risk for project success.
- Resource Staffing and Competencies: Similar to the first category of business risk, these risks involve project team staffing, resource allocations, competing priorities, individual competencies, and organizational stability. For example, consider any potential changes in executive leadership that might negatively impact project sponsorship.
- Change and Cultural Adoption: It’s our experience that many companies struggle with organizational change management. Successful adoption of change across the enterprise requires mature change management techniques, principles, and experience. This area of risk relates to general acceptance or resistance to change, individual adoption of the project activities or outcomes, and just as important – the overall readiness of each functional area to move forward in executing the day-to-day expectations of the business with confidence, efficiency, and success.
- Process Capability and Future State Expectations: It’s important to proactively assess risk associated with the process expectations as well as what the capability of those processes are. Understanding these expectations is key to ensuring the project team delivers the results in terms of anticipated business efficiencies, productivity goals, and value targets,
ERP Risks – Next Steps
Proactively identifying ERP risks is an important part of risk management best practices.
That’s why our ERP consultant team applies the discipline and tools throughout the implementation process to proactively identify, plan for, and mitigate risks every step of the way. This is a key part of Ultra’s effective Risk Management and Mitigation services that are inherent in everything we do.
Watch for my next post on additional risk perspectives and categories.
Contact Ultra to see how our extensive experience in managing hundreds of enterprise change initiatives can help your organization anticipate, identify, and mitigate risks.