CIMA E2: Risk Management

Project management, as you are probably aware due to the nature of may recent blog articles, plays a significant part in the CIMA E2 syllabus. Managing projects in the finance department (or office) is becoming increasingly common place and it’s an area of the syllabus I can actually relate to my work experiences directly.

A key theme in the project management section of the E2 paper is based around Risk Management and how to manage the risks you have identified in the planning stage of the project.

The main model or acronym you should remember is TARA.

  • Transfer
  • Avoid
  • Reduce
  • Accept

Once you have drawn up a list of the risks you need to manage they should all fall into one of the above TARA categories. To get a clearer picture of how this works, each category can be placed in a matrix.

CIMA E2 Exam Tips

If the risk you have identified will have a LOW impact of the business and the probability is also LOW then it would make sense ACCEPT the risk in this instance.

Risk Management Example:

You are running a project that aims to improve the reporting process of the finance department and you have identified a RISK that;

  • The support staff on your IT help desk may become overloaded when your new project commences.
  • This will have low impact on the project itself as the project will be given proirtiy bu the IT helpdesk but this would affect their other duties.
  • Meanwhile, it has a very probable chance of happening due to the small resources on the help desk.

So this risk would be HIGH probability with LOW impact.

Therefore, using the TARA model we would need to take action to REDUCE this risk.

  • This can be done by employing temporary support staff on the IT help desk during the time when the project is up and running to ensure the project support is covered as well as the regular tasks by the IT help desk.

TARA Explained:

TRANSFER:  this would be the case of transferring the risk to another party. This risk would have a HIGH impact of the business but in reality it has low chances of happening i.e. an insurance policy is a common way to transfer the risk.

AVOID: if you have identified a risk with HIGH impact and a HIGH chances of happening then urgent attention would be required to ensure the risk was avoided. In most cases, the task should be not be carried out if an alternative solution can not be found. i.e. the option of renting machinery is an alternative from buying the machinery.

REDUCE: reducing the risk can be carried out in many ways – we’ve used one example above on how risk can be reduced. It’s the type of risk that would have a HIGH impact but is unlikely to happen. i.e. the threat of your IT equipment being stolen, therefore this risk can be reduced by buying additional security for the office.

ACCEPT: or risk retention. Here we are saying we have identified the risk but it’s  not feasible to try to reduce the risk (could be cost related), so we will just have to accept the risk. Projects could take on lots of small risks that will just have to be accepted as it doesn’t make sense to insurance or negate against this risks.

E2: Useful Links and Resources

E2

E2 Project and Relationship promotes an integrated approach to managing organisations from an internal and external perspective. It takes the knowledge you have gained from the E1 paper and builds on it by looking at the concept of strategy and how it can be implemented by people, projects, processes and relationships.

Here are a come useful websites and links to get you started on your way to passing the E2 Project and Relationship Management paper.

E2 Useful Links and Resources

Astranti Managerial Membership – Free Study Text 2015 – Astranti provide free study texts for ALL of the CIMA  papers and I use them as a base for my exam preparation. They are easy to digest and can be accessed anywhere with an internet connection.

CIMA Connect E2 group – the official CIMA connect page for E2 students. You can find articles on the E2 syllabus as well as a place to discuss the paper with other students and CIMA moderators.

The Change Process – study notes released from CIMA on the change process within an organisation. Discusses how companies should counter internal resistance to change.

How to Keep Mega-Projects on Target – a useful insight to the world of project management and how management accounting can be used to keep global projects on track. Falls under area D of the E2 syllabus.

Acorn Financial Training – Acorn provide class room tuition and home study materials. You can get an extra 10% off ALL of the acorn materials (including E2). Here can find the full the list of materials they offer and to claim the 10% discount please email thecimastudent[at]gmail.com with the items you wish to order.

If you have any additional resources you would like to share with other students for the E2 CIMA paper then please then a link in the comments box below.