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Yesterday Aug 4 at 7:55pm
Examination of how awareness of Potential Risks Influences the decision to Hire Outside Vendors
The awareness of risk factors, especially conscious, subconscious and affective issues, can significantly influence the decision to hire external vendors or employees when planning to undertake a new project (1, Hillson)
The conscious factors include knowledge and expertise, risk tolerance and appetite, and cost-benefit analysis. Knowledge and expertise are vital when conducting a new project since it enables an organization to assess whether they have the in-house expertise and capabilities to handle certain phases in a project (1, Hillson). For instance, if a company is looking to introduce a new blockchain-based system, they must consider the availability of that expertise in the organization, prompting the decision to hire outside vendors.
Another conscious factor entails risk tolerance and appetite before hiring outside vendors. A company that is not ready or incapable of handling certain risks must hire experienced employees who have worked on the same project before. A low-risk tolerance means that a company must hire experienced and qualified vendors to ensure that it is successful (1, Hillson). Additionally, cost-benefit analysis is vital as a trade-off of hiring external expertise while considering vital issues such as budget constraints, timelines and project complexity.
Some subconscious factors include availability heuristic, anchoring effect, and social influence. The availability heuristic factor significantly influences the decision to hire outside vendors since they might focus on examples of recently successful or unsuccessful projects. Also, the first piece of information encountered regarding potential vendors is another anchor regarding the decision to hire external employees in project management (1, Hillson). Another factor entails the subconscious cues from industrial norms that can impact the decision. The perceived failure or success of competitors’ projects, especially after hiring external vendors, is another factor that can influence this decision.
Some affective factors include emotional response to risk, intuition, which is commonly known as gut feeling, level of confidence and trust, and well as regret avoidance. Risk managers also consider their intuition and level of confidence in outside vendors when deciding whether to hire them. If they have a negative intuition, then the chances of hiring outside vendors could be higher in project management. Another important affective factor entails regret avoidance, which every project manager and involved company seeks. Regret in project management means that it has failed, or not met the project goals and objectives. Therefore, affective factors are also key with regards to risk management and project management.
How the stated Factors contribute to the overall Facilitation and Effectiveness of Risk Management
First, the stated factors enable comprehensive risk assessment, especially the conscious factors such as assessment of knowledge, expertise, and cost-benefit analysis. When project managers consider these factors, they can effectively identify potential risks associated with a certain project while hiring external help. This factor enables them to make informed decisions that align with the organization’s risk appetite and goals.
Second, being aware of the risk factors, such as subconscious factors like the availability of heuristic effects, allows decision-makers in project management to mitigate potential cognitive biases consciously. Awareness of these potential risks enables decision-makers to actively gather diverse perspectives, challenge current assumptions/stereotypes, and avoid relying on biased information. Therefore, they can make the right risk management decisions since they will rely on objective assessment of potential risks. Thus, decision-makers can also boost the probability of success in project management once they adopt this strategy.
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