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RESEARCH -Project controlling and project risk management practices in Hungary

Due to their complexity, today's large organizations carry out some of their key activities within the framework of projects. It is essential for the successful implementation of projects that organizations can effectively plan, implement and measure the results, but these processes often do not work properly due to possible shortcomings in project control and risk management.

Thanks to this recognition, Techwave Hungary Zrt. And its subcontractor, IFUA Horváth & Partners Kft. and help organizations seeking to manage a multitude of projects. The application was successful, the work could start, in which the Department of Management and Control of the Corvinus University of Budapest also joined.

1. The main results of the survey

a) Projectcontrolling

It is a question debated in professional circles exactly which factors determine the success of applications and projects the most. The most frequently named such success criteria can be linked to the fulfillment of the project’s plan fact, i.e., how well organizations are able to meet the time frame and stay within the specified budget throughout their lifecycle. Therefore, in addition to controlled risks, the planning, implementation and control of project resources is of paramount importance. In the case of the higher education institutions and large companies we contacted, the use of IT solutions connected to the ERP system to support the financial planning and monitoring of projects is not uncommon, 2/3 of the companies use some kind of IT target system.

However, companies do not have a single solution for what purpose tool should be used to perform project-controlling tasks. During the surveys conducted in the first phase of the research, we came across diverse solutions. Many vendors and developers offer a variety of solutions to problems in organizations, with users mentioning reputable and lesser-known vendors, but typically recording the information they need in already known Excel spreadsheets. The organizations interviewed follow a monthly or up to quarterly reporting practice, in addition to which the executives regularly evaluate the progress of the projects. Projects with higher budgets require senior management decision, while smaller projects fall into lower decision-making powers. In the case of public service organizations, it is also highly dependent on the project sponsor whether the reports produced are in a free or pre-designed format and format.

The degree of control over projects is also influenced by the type of project. Design and control are based on different aspects of a project for a product development, a transformation project, or an SCC scope - Contractor Safety Certificate.

In our research, there was also an example of a case where the financial monitoring and management of projects were separated and control tasks were performed by two different units or individuals.

All in all, the project controlling tools and methods used by the organizations participating in the survey are extremely diverse. It is also clear from this that the control mechanisms depend to a large extent on the characteristics of the organization and the characteristics and peculiarities of the project.


b) Project management supporting IT solutions


IT systems that support project management can greatly facilitate project management processes. Companies that use some kind of IT target system in this area are more successful in implementing projects. However, in the case of the organizations we interviewed, we found that although attempts were made to integrate different project control systems into the organization or to develop our own system, these initiatives were clearly unsuccessful. The vast majority of our respondents did not have a coordinated, synthesized project support system. Excel-based tracking is usually done for companies, but the use of IT systems also depends on the industries. In the finance and insurance, technology and media industries, 100% use dedicated software to support project management, and in construction and higher education, at least 75% use some form of electronic records, but not dedicated software. In the case of the public service sector, it can be seen that such target systems are not used at all.

It is typical for larger, for-profit companies that if there is a dedicated project management support tool, it is also connected to the company's ERP system, which in many cases provides financial and controlling data, can more effectively support not only project management processes, but also management decisions, data basis. All in all, it seems that the organizations, most of them the institutions performing public tasks, do not have an integrated, unified system in which the management of transactions and reports can be produced for the top management. Excel templates with management methods in your own toolbar are more common.


c) Risk management


Projects may experience events at any time that may affect the purpose, effectiveness, timeliness, and budgeting of the project.

Companies that use PMO by default also have a higher rate of risk assessment. In most cases, risks are updated along milestones, but standard practices that are developed are not really available. More detailed risk analysis and factor identification will result in more frequent elaboration of follow-up actions. In addition, organizations with a risk-responsive internal reporting system place more emphasis on updating risk assessments more regularly.


A projektek tervezésekor vagy projektmonitoring során a gyógyszer- és vegyipar, pénzügy és biztosítás, szállítmányozás és egyéb kategóriákban az általunk megkérdezettek 100%-ban végeznek kockázatkezelést, míg az építőiparban és a közszolgálatban ez az arány 0%. Összességében az ágazatok több, mint felében a vállalatok legalább 80%-ban alkalmaztak kockázatkezelést a projektmonitoring vagy projekt tervezése során.

Az interjúk során megismerhettünk egy igen kiemelkedő kockázatkezelési metódust, melynek területei a szervezet stratégiai tervének is tartalmát képezik. A kockázatokat félévente vizsgálják felül adott belső és külső mutatók alapján. A kiváltó okok és következmények valószínűsége mellett kidolgoznak egy kezelési stratégiát is a lehetséges opciókkal és beavatkozási pontokkal. Ezenkívül a kockázatmenedzsment leginkább figyelt tényezői az idő, a humánerőforrás-felhasználás és a költségkeret betartása. Gyakori az új termékfejlesztéseknél a piacelemzés, amely a pénzügyi kockázat csökkentésében is szerepet játszik, illetve a különböző pénzügyi mutatók használata. Sok esetben a projektindítás feltétele a kockázatok felsorolása és definiálása, amely rendszerint múltbeli tapasztalatok alapján történik. A szervezetek egy részénél a lehetséges kockázatokat területenként kategorizálva kezelik.


2. Conclusions

Our research was largely fueled by a comprehensive exploration of the domestic and international literature, on the basis of which our experts established 7 assumptions, on the basis of which we also conduct the questionnaire search and in-depth interviews.

Our seven starting assumptions are:

  1. When projects are launched, the definition of goals and frameworks (time, cost, resource) is not properly recorded, making it difficult to evaluate real performance during re-measurements.

  2. During their operation, the projects do not collect enough objective data, a large amount of natural resources, which would provide an opportunity to examine the status of the project in a credible way.

  3. Projects are planned, but their continuous monitoring is given less emphasis in the organizations.

  4. Ex-post evaluation of projects is often lacking in the organizations surveyed.

  5. Predictive forecasts are typically not used in the analysis of project implementation.

  6. Because of the previous hypothesis, organizations lose opportunities to intervene that would significantly contribute to the success of projects.

  7. In analyzing the entire life cycle of projects, institutions rely solely on the experience of their own projects, and today they do not have the opportunity to analyze other factors influencing project results (benchmark database) that could contribute to achieving the optimum of the project.

None of our specified assumptions proved to be incorrect, whereas all of them were partially or completely confirmed.

Evaluating the results of projects and measuring their real performance is a common problem during the operation of projects. The root of this can be traced back to the launch of projects, as the goals and frameworks to be achieved are often not defined precisely enough. Closely related to this is the ex-post evaluation after the closure of the project, for which in most cases there are not enough resources left. This eliminates the need to re-measure the impact of the project and determine its benefits. The research fully confirmed these assumptions.

The survey also partially confirmed that organizations do not collect enough objective data and metrics (KPIs) over the course of projects to provide more credible traceability. In addition, insufficient emphasis is placed on predictive forecasting in the analysis phase and the intensity of ongoing project monitoring could be further increased to achieve a higher success rate.

Directly related to predictive forecasting is also the strongly substantiated assumption that organizations often lose the chances of intervention leading to success due to a lack of analysis. This can also be attributed to the fact that they do not carry out benchmark research, they do not collect a database, they only rely on their own past experience, and these are often not available in a synthesized form and do not provide enough information.


3. Practical applicability of the research

This kind of examination of applications and projects proved to fill a gap in Hungary. Our research has examined a number of issues and assumptions that can be applied in practice, which are of key importance to the project management practices of organizations. Based on our surveys, it is clear that institutions and large companies do not currently use applications with sufficient depth and complex functionality for controlling, managing and re-measuring projects - while the need for such a complex solution is clearly present in the market.

Overall, it can be said that:

  • Controlling and risk management of projects is very necessary for successful project management.

  • Project management is currently incomplete in the study period.

  • When projects are started, goals and frameworks (time, cost, resource) are not recorded properly, and it is difficult to evaluate real performance during re-measurements.

  • Knowledge management is incomplete, organizations do not have the know-how needed to run projects successfully.

  • Ex-post evaluation of projects is often lacking in the organizations surveyed.

  • IT support for projects is incomplete, using Excel spreadsheets is typical.

  • Organizations do not incorporate appropriate checkpoints into projects that could provide an opportunity for correction, a return to the original goal.

  • Organizations do not use innovative, data-driven, predictive risk management methodologies.

  • Reporting on projects is often incomplete and senior management does not receive comprehensive information.

Based on the data extracted from the research, the development of a tender and project controlling tool is well-founded. Building on the results, we can develop more conscious and methodical project controlling and risk management systems for them. The project optimization controlling model, developed as a result of the development initiated by Techwave and IFUA Horváth and based on research, and the complex tool based on it will help organizations to operate more efficiently in a cloud-based, platform-independent, modern, scalable and feature-rich tool. to manage their projects and to provide senior management with an up-to-date, comprehensive picture of the projects launched.


About the survey

The questionnaires of IFUA Horváth and Techwave Hungary were filled in by a total of 55 Hungarian institutions, of which the answers of 27 respondents were finally included in our research after the synthesis of the received answers. Of the respondents processed in the research, 21 were market-based companies, 5 were organizations maintained by foundations, and one was a budgetary institution. In terms of sectors, manufacturing companies, technology companies, higher education institutions and construction companies stood out. The other leg of our research, in addition to the questionnaire, was the in-depth interviews. Based on our assumptions made using preliminary expert opinions, we compiled our questions during the in-depth interviews. Our interviews focused on senior executives from higher education institutions, budget institutions and large corporations. A total of 14 interviews were conducted, of which 7 were with information technology service providers, home appliance manufacturers, automotive suppliers and pharmaceutical companies, among others, and 7 with public service managers.


The research was carried out in the framework of the project "2020-1.1.2-PIACI-KFI-2020-00038 - Development and integration of the project project controlling application for risk forecasting and analysis" ProCont "into a large enterprise environment", for which the Ministry of Innovation and Technology and provided HUF 280 million in support through the Innovation Office.


Authors:

Krisztina Neumann-Toró senior consultant IFUA Horváth

Péter Gábor Szabó advisor IFUA Horváth

Honti Henriett advisor IFUA Horváth

Diána Nagy advisor IFUA Horváth

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