Risk Management and Tacit Knowledge in It Projects: Making the Implicit Explicit

This research addressed the need for in-depth investigation of what actually happens in the practice of risk management in software package implementation projects. There is strong ‘official’ sanction in the IT literature for the use of formal risk management processes for IT projects but there is a confused picture of their application in practice. While many potential risk factors for IT projects have been identified, and formal procedures have been prescribed for the management of these risks, there has been little work investigating how project managers assess these risks in practice and what countermeasures they employ against these risks in their projects. In particular, the study used an interpretive critical decision interview approach to focus on those areas of risk management knowledge that project managers have acquired through experience, i.e. tacit knowledge. A new categorization of risk factors emanating from three sources -vendor, client, and third party –reveals risk factors not previously identified. Some of these new factors arise from the three sources noted, while others arise from the package implementation focus of the projects and from aspects arising from the location of the projects in Hong Kong. Key factors that cause problems even when anticipated and mitigated, and the most often unanticipated problems are also identified. The study further presents an examination of the studied managers’ risk management practices, and the strategies they use to address both potential and actual problems. This examination revealed close conformance with recommended literature prescriptions at some stages of projects, and significant variation at other stages, with strategies applied being broad and general rather than risk specific. A useful categorization of these strategies into four broad groups relating to different sets of risk factors is presented, reflecting the actual practice of respondents. Tacit knowledge was revealed throughout these investigations in the variances observed between prescribed and actual practice, and particularly from an examination of project managers’ decision-making practices from two different perspectives rational and naturalistic. A hybrid decision-making model is proposed to capture the actual processes observed, and to provide prescriptive guidance for risk management practice. The investigation makes a contribution to the field of IT project risk management in three ways. First, the investigation has addressed the need for empirical studies into IT risk management practices and the factors influencing project managers in their choice and application of strategies to manage risk. Second, by examining how experienced IT project managers approach the task of managing risk in software package implementations, the study has extended our understanding of the nature of the knowledge and skills that effective IT project managers develop through experience. Third, the study makes a theoretical contribution to our understanding of IT project risk management by examining the decision-making processes followed by IT project managers from the perspective of two contrasting theories of decision-making – the rational method and the Naturalistic Decision Making theory.