PROJ420 – Project Risk Management
JC Gear Case Study

Risk: A Case Study: "Risk Options: The Automated Production Control System Case"
The following short case will give you a good idea of how risks surface in business and project planning and what companies do about it. Consider that you are the Risk Manager as you look at this case, as it will be a good exercise for the time when you will be that Risk Manager!
The JC Gear Company has decided to initiate a project aimed at automating its production planning and control system. Among the options, the company focuses on two alternatives: (1) purchasing the most suitable system off of the shelf and modifying it according to its individual production needs; or (2) developing a system that will support all of the specific production-planning policies and procedures currently in use. The first alternative represents a project of relatively low development risk; however, the benefits may be minimal. This is because most off-the-shelf software packages have limited flexibility and can only rarely be made 100% compatible with the existing work environment. The second alternative offers a higher chance of achieving the technological and functional goals, but involves a significant software development risk. The development and integration risks are higher with the second alternative, and consequently, the risk of schedule delays and budget overruns is also higher. Yet the opportunity in the second risk area is greater because of the improved performance potential of a tailored system.
The first alternative creates major negative "events," including an inability to modify the software to accommodate a given need, and an inability to integrate the package with an existing management information system and database. The second option also creates risk "events," including possible unexpected difficulties in integrating the