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Lets take a look at how risk can make or break an ERP implementation. To begin with, the term “risk” has a negative connotation. Whenever we talk about risk factor/s, we think we need to focus on mitigating the risk to ensure success. In reality, risk can also be positive and, if handled properly, actually bring success.

It goes without saying that an ERP implementation is a “risky” endeavor. This is mostly because ERP implementations affect activities across all (or nearly all) areas of the enterprise. This causes significant – if not massive — changes across several categories, including:

  1. Technical – newly imposed technical solutions require new technical knowledge base, usability, etc.
  2. Non-Technical – implementing technical solutions requires some level of process change
  3. Behavioral – acceptance of change requires behavioral adjustment to the new environment
  4. Relationship – change across the enterprise/organization causes changes in relationship metrics

The above list makes it obvious that the changes coming from ERP implementation are not only significant in amount but variety. And various types of changes require various approaches and strategies to handle, which can be a daunting task for any leadership team.

The sheer number of changes involved imply that implementing any ERP system is “risky.” And managers will likely want to handle the changes to mitigate these risks. But whether risks should be mitigated or enhanced depends on the type of risk.

Consider this: a risk is something that can alter the path of planned actions if it occurs. If the alteration impacts the project outcome negatively then it’s considered a negative risk and must be mitigated so that project can continue as expected. On the other hand, a positive risk can result in a better outcome in the project path and must be enhanced and/or exploited for the best possible results.

A simple example of positive risk could be as follows: While implementing ERP systems, a large amount of business process change in an organization is not unusual. If not handled properly, these changes can pose a significant risk and turn a successful technical implementation into an unsuccessful ERP implementation. However, handling the situation with activities like creating an ERP business blueprint, involving appropriate parties at the right time to increase buy-in, increasing the sense of ownership, training in an appropriate and continuous manner, and so on could lead to a successful implementation in true terms. By not avoiding but enhancing the risk, and making the right efforts to bring about significant and positive change, the ERP implementation will include acceptance of the new system across organization, an improved knowledge base with proper documentation, and trained and empowered employees with increased efficiencies and productivities through the use of the new system.

It is important to recognize that not all change is bad. As long as it is managed/exploited in a fashion that encourages an improved situation, change can actually bring great opportunities for improvements. Leadership teams must understand both the positive and negative risks in an ERP implementation, categorize and analyze these to understand what impact they might have, and then identify how these could create (or derail) both a fruitful implementation and a beneficial outcome for years to come.

Blog posted by Ipsita Mitra, Director of ERP Selection and Implementation at Panorama Consulting Solutions

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