Role Of Internal Audit In Risk Management Information Technology Essay
The purpose of this paper is to explain the role of internal audit as an organizational activity and how this activity can help and support risk management of project management. In this paper i will briefly discuss different types of project management processes but main focus will be risk management.
Risk management is a central part of a project management. The main purpose of risk management is to overcome the probability of risk that is involved with any project. Risk associated with any project is always a concern of a project management team which needs to be handled in a best way.
In this paper I will also discuss some of the organizational techniques.
Key words: Risk Management, Project Management, Organizational Techniques, Internal Audit.
Every organization has certain projects which need to be completed in a sophisticated and scientific manner. It is an organization responsibility to carry out certain mechanisms which leads to a successful project completion.
Project management is a carefully planned and organized mechanism to accomplish a successful project. Project management includes a number of processes which ensure project successful accomplishment. In this paper I will explain different elements of project management but my main focus will be risk management. In the second part I will explain some of the organizational techniques and at end of the paper I will compile the role of internal audit as an organizational technique and how it can improve risk management of the project management techniques.
Project management is a set of principles, tools, methods and techniques which can ensure the effective management of object-oriented work or project. Project is an activity of the business environment which is created by the organization for a specific period of time. Project has a beginning and an end. Project needs certain resources like people, time, money, materials etc. Project management requires a system approach to manage different elements of project. This system approach includes a holistic view of a project environment, and an understanding that the project is made of a series of interacting components working together to meat an objective in order to get the desired benefits.
Project management processes
Project management processes or techniques are overlapping activities that occur at varying levels of intensity throughout each phase of the project. A process or technique is defined as a set of activities that must be performed to achieve a project goal.
Project management team requires a systematic approach to manage different elements of a project. This systematic approach requires the identification of processes and techniques to define the entire project management framework. These processes and techniques help the project management team to understand the basic structure of the project and help them to properly manage the project.
There are several project management processes (techniques) which help to manage different elements of a project. Different projects have different needs from each process, for example a project where cost is defined as a critical success factor will spend more time and efforts in developing a cost management plan. These processes are key knowledge areas for the project management team. I will discuss all of these processes but will give more attention to risk management.
These project management processes include:
Scope management process defines the boundaries of the project. It define what is included in the project and what is not included. It also defines the requirements of the project and the outcome of the project. This process insures the identification of goals and objectives of the project and their proper documentation.
During this process scope management plan is created which help to manage any change to the project. This process helps project managers to deal with scope creep, which include additional work without considering the impact on the resources or schedule of the project. To manage scope creep scope management process establish scope change control plan which facilitate the impact of the additional work.
During this process the project is divided into a hierarchy of work task and individuals are assigned which represent the work to be done. The project managers use Work Breakdown Structure technique to accomplish this task.
This process ensures the completion of a project on time. It develops a project schedule which contains information regarding all project activities. The project tool work as a communication tool which inform project stakeholder about the status of the project. It gives information to the project team members in the form graphs and charts and show that when an activity is going to be begin and end.
Schedule management estimate the time that when an activity is going to be completed, the relationship among the activities and the sequence they should start. The project schedule also assign different task to the team members.
Budget is always very crucial to any project and always a big concern of the project managers. The main objective of a budget management process is to ensure the completion of a project with in approved budget of the organization.
The main steps of budget management process include, the definition of all resource requirements the project will use, for example consultants, materials and equipment’s, cost estimation of all the resources including human resources. This process also develop a budget baseline which can be used to track and report budget expenditures.
Quality management ensures that the project will satisfy the needs of the beneficiaries. The first step during this process is that the project managers develop quality management plan which identifies the quality standards related to a project. Secondly it ensures the execution of the quality management plan. The third process in quality management is quality control. This process compare the outputs of the project with quality standards and check it whether it meet the standards or not. The final process in quality management is quality improvements which include the study of quality plan and identify ways to improve quality. It eliminates causes which lead to unsatisfactory quality discovered during quality control.
Team management is a process for managing a group of individuals working in a group for a common goal. Under the definition of the project process a list is created where define the skills needed for that project. That’s skills consist of technical to managerial and support tasks. The project team is responsible for the whole project and identifies the skills according to the skill it needs.
Team management consists of different process to make the most effective use of the different peoples, Involved in the team according to the skills. They work under the different rules.
The first step is assigning the roles, tasks and defining the goal. The goal should be clear. One key of success is to pinking a right goal. The project manager role is most important in team work. Project manager must be the involved for conducting the interviews with possible candidates.
The second step is getting the different people that will be the part of this project. At the beginning of the each quarter, you must hold the meeting for the discussion about the goal and also make a discussion why each one of them is most important and also gather the feedback and at the end of this meeting assigning the goal to individual. At the end of the each quarter I took some time to go over our past quarter’s performance, and discuss how we can learn our past experience and how can we manage the things with our past experience and how can we forecast the situation.
This is a time where the improvements of the ideas come about. It’s must important to highlight the positive things that affected our results positively. One key thing is that analyzing the negative results for going to be forward looking and also encourage our teams to do things positively and minimize the occurrence of such negative things.
Managing the expectation about anyone that has an interest about project called the stakeholder management. Stakeholder is all the peoples who have an interest about the project. There might be the donor, government, partners, and anyone who belongs to that project. Every project has a different list of stakeholders.
Management of stakeholder is much difficult; it’s not an easy task. For the management of stakeholder you must be a good relationship with them and you must build a trust between them. Stake holder management consists of different processes i.e. analysis, planning, and communication. Analysis means, it’s a technique and used for identifying who are the project stakeholders and the next is the level of interests and influence related to the project and the final one is developing the good interests, understanding and the communication strategy and the relationship is also help for the stakeholder management.
Stakeholder management also helps to manage the different expectations because each stakeholder has different expectations about the project. Stakeholder can also help in the difficult situations. Insufficient concerns and communication with stakeholder is a cause of the failure project.
A good stakeholder management is also control the politics that can often come during the project period. The failure of the project may be the cause by miss judgment of the stakeholders. Same as the success of the project also depend upon the good judgment by the stakeholders.
Information management plays a very important role in the success of a project. This process includes timely and appropriate generation and delivery of information. Most of the project managers spent their time in communication through reports, email, telephone, meetings and presentations. Project Management team define a plan which specify that what type of information the stakeholder require, when and how that can be distributed.
Contract management consists of activities that are depending upon the arrangement between the customer and provider. The contract Management consists of four steps; creation the resources plan, implementation, review the plan and update the plan. Resource plan is developing on the bases of budget limits.
Implementation of the plan, here we develop the selection criteria and terms and condition, here we can also be mention goods, services, offers and packages. Review the plan and update the plan develop according to the need.
Contract management will not only specify the goods and services, but it can also specify the organization procedures and restrictions.
They can be consists of three areas.
Service Delivery Management
Service Delivery Management:
Communication is the important in case of service delivery management. The communication must be clearer without leaving any doubt. It must ensure that the service is delivered with quality and performance.
Keep in relationship between two parties for the purpose of resolving issues and diagnose the problems early.
Contract administration provides the governance of contract and changes the documentations.
Risk Management Process
Risk is one of the key issues attached with every project management process and always a big concern of the project managers. Project managers have the responsibility to minimize or control the probability of risk involved in a project. Risk has a negative impact on the goals set by the project management team. To achieve the objectives of a project and minimize the chance of project failure risk needs to handle with great care and responsibility.
Risk management process makes the management able to identify, analyze and respond to project risk. Risk is something if may happen can cause an adverse impact on the project. Risk management is a step by step procedure which includes the following stages.
Risk identification is a process which is used to identify those internal and external factors that may have a negative impact on the project. These internal and external factors may include change in information system, controls, programs and political and environmental changes. The main purpose of this process is to study the potential threats related to the project and the documentation of their characteristics. Each project team member uses its own knowledge and experience to evaluate these potential threats and gives their suggestions about the risk.
Risk analysis is used to identify the adverse consequences related to a risk. Risk analysis has to approaches to analyze the risk. One is qualitative risk analysis which assesses the importance of identified risk and makes a list which prioritizes the risks for further analysis. The second approach is quantitative risk analysis where numerical calculation takes place to estimate the probability of a risk and their impact on the project.
Risk Response or Treatment
In risk response project members take certain measures to handle the risk. Their main focus is to evaluate high risk items. It identifies and assigns staff to handle different risks. The project management defines a strategy to cope with these risks and take actions to implement the strategy.
Risk Monitoring and Control
It keeps track of the identified risk and new risks. It ensures the execution of risk response plan and evaluates their effectiveness. The process continuous until the project is completed. It identifies and analyzes new risks and provides an alternate plan to handle these risks. This activity helps the management to keep the project on the right path.
Tickler file is a collection of information in the form of memorandum that gives the information about the done work. Tickler file is the organizational asset that can be used for memorize the things.
Tickler file also used for defining the agenda of the meeting in bases of the day. The index cards are used to keep the information but you can also use the papers too for keeping information. Even you can also keep the travel documents in your tickler file.
The chron files have all correspondence as you send all over the months. It might be created every month in date order. In this file all the letters save as you send out, with the help of this all records have been stored in this file regarding send out letters. If you use the client chron file then you also have the copy of the all send out letters as a backup.
Internal audit plays a very important role in the organization. An internal audit is an independent activity of the organization which ensures the organization to achieve its objectives and provide consultation to the management to add value and improve organization’s operations. It helps the organization to achieve its goals through a systematic approach. Its main role is to evaluate and improve the effectiveness of risk management, control and governance processes. Internal help the organizations to improve its performance. Internal audit consist of different phases which include;
Planning phase- During this phase audit objectives and scope are developed by audit committee and the concern members of management are notified. During this phase initial audit objectives and audit notification letter are set. The initial objectives define the audit purpose and establish the direction for detail work. A notification letter is sent to the concern department.
Organizing phase- During this process the auditors develop detail audit plans. This process also includes the development of preliminary audit program, prepares administrative documentation, prepare an agenda for the opening conference and conduct the opening conference.
Preliminary phase- In this phase the auditors try to get as much information about the department which is under audit as they can to build their understanding. Auditor get access to every document available including accounts, transections and other techniques used by the department.
Conducting phase- In this phase the auditor execute the approved audit program.
Reporting phase- This phase begins after the end of audit activity. In this phase the auditors discuss the required changes with the management and prepare the final audit report and issue the report.
Types of internal audit
Departmental audits- These audits are used to review and evaluate the activities and operations of a particular department.
Financial audits- These audits are used to validate the financial records and account balances of an organization. Financial audits determine whether financial information of an organization actually represent the financial position of an organization or not.
Operational audits- These audits are used to evaluate those operational activities which impact organizational goals.
Grant and contract audits- These are used to evaluate the contracting and granting process of an organization.
Frauds and financial irregularity audits- These are designed to verify fraud and financial irregularities.
Role of Internal Audit in Project Risk Management
Internal audit play a vital role in project risk management process. Project risk management is complex activity and project management may not have the appropriate expertise to deal it. Internal audit can help project management to minimize the risk and achieve its goals and objectives.
Internal auditors obtain all documents from project management regarding risk management framework and review all documents and reference materials to asses that whether the process used by project management is appropriate and best practice or not. Internal auditors ensure that all project members involve in risk management process clearly understand risk management procedures.
Internal auditors assist project management in planning procedures and ensure that early warning mechanism of disaster exists. Internal auditors also asses how to identify risks and do participate in risk monitoring and reporting activities. They provide training to those project management members who involve in risk management and also provide their support in case negative impact on project goals.
Role of Internal Auditors in Risk Identification
Internal auditors independently evaluate that whether project management has identified and priorities the probable risk or not. The internal auditor must ensure that risk with a low possibility of occurrence has been considered by the project management team.
Role of Internal Auditors in Risk Analysis
Internal auditors will make sure that the project management has adopted an appropriate and best technique to assess the risks and has used a combination of qualitative and quantitative techniques in risk assessment.
Role of Internal Auditors in Risk Response
Internal auditors will make sure that the system of risk treatment adopted by project management team must be able to bring anticipated risk likelihood and impact within tolerance level. Internal auditors will play an active role in risk response.
Role of Internal Auditors in Risk Monitoring and Control
Internal auditors will ensure that appropriate controls exist in the project risk management and that monitoring activities are progressing in an efficient manner. They should be satisfied that separate evaluations focus on the effectiveness of the project risk management
Risk management is a key element of project management and it is a project management team responsibility to handle the risk management framework in a positive manner to minimize the probability of risk. Risk management process helps project management to achieve its goals and objectives. Internal audits provide assurance to project managers about the effectiveness of risk management process. Internal auditors provide their assessment and expertise to project management team and advise different solutions regarding risks.
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