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Risk vs Issues [ Based on Various Factors ]

Can you guess a reason behind project failure? Here’s a hint. A poor risk or issue management can lead to project failure. According to PMBOK, risk can be defined as an uncertain event or condition that results in a positive or negative effect on a project’s objectives. Whereas, an issue can be defined as an event or condition that has already happened and has impacted or currently impacting the project objectives. There are certain grounds on which we can differentiate issues from risks. Let’s take a look at the differences. Difference between Risk & Issues Before moving to the core differences, let’s take a look at the comparisons between examples of risk and issues through the following chart: Risks Issues A critical resource might leave the project A team member resigns Team members of the project might take vacations during the critical time of the project. No one can be confirmed when team members would take vacations. There may be unanticipated requirement changes. New functionality has been found that needs to be added to the scope of the project. Something new might come up after impact analysis that may push the project dates. Two new changes which are the outcome of Impact analysis resulted in pushing the project deadline by a week.   First of all, let’s look at the high-level difference between “Issues” & Risks”: Now let’s see how risks & issues play an integral role in a project: In general, if a project manager identifies all the possible negative risks and their respective response plans within the project, then the possibility of issues can be drastically reduced.  (i.e. prevention is better than cure). However, certain unforeseen situations may still arise which turn out to be issues. They could be certain potential risks which were unidentified in the past. They could also be risks which have been already identified, where the risk response plans are inadequate- and those events turn into issues and impact the project. If a project manager pays inadequate attention to risk management, there is a greater possibility of his spending his valuable time & efforts later in managing the issues that arise! Now, when it comes to issue management the project manager will document the issues in the “issue register” and will perform an issue analysis to identify the possible “work-arounds” to fix the issue. For example: Let us suppose there is a FIRE in the room. If we consider this in the context of issue & work-around, we say that there has been an occurrence of a fire, and we need to put it off by using a fire extinguisher. Since issues are present focused, there is a very limited time available to identify the work-arounds required to fix the issue. Once the work-arounds are identified, it’s also equally important that such issues should not get repeated in the future. There should also not be any possibility of re-occurrences in a different form, in order to bring it to a permanent closure.  In case of a re-occurrence then such events will be treated as “risks” because risks are future focused. They will be documented in the “risk register” and then sufficient risk response plans should be identified to cover those possible future risks. What are the types of risks in Project Management? Risks in projects are inclusive of both internal risks that are associated with the successful completion of each project as well as the risks that are beyond the project team’s control. The following are a few of the most common project risks: Cost risk: This refers to the escalation of project costs as a result of poor cost estimating accuracy and scope creep. Schedule risk: This refers to the risk of activities taking longer than expected. Drifting away from the schedule typically increase costs which leads to a delay of receiving project benefits and possible loss of competitive advantage. Performance risk: This refers to the risk of failure to produce consistent results with project specifications.   There are some other risks which result in cost, schedule, or performance problems and create other types of adverse consequences for the organisation. They are as follows: Governance risk: This risk relates to the board and management performance with regard to ethics, community stewardship, and company reputation. Strategic risks: These risks are the result of the errors in strategy like choosing a technology that can’t be made to work. Operational risk: These risks comprise of risks from poor implementation and process problems like production, procurement, and distribution. Market risks: These risks comprise of risks related to foreign exchange, competition, interest rate, and commodity markets. This also includes liquidity and credit risks. Legal risks: These risks arise because of legal and regulatory obligations which include contract risks and litigation brought against the organisation. External hazards risks: These risks are incurred due to storms, floods, and earthquakes. Other than these, vandalism, sabotage, terrorism, labor strikes, and civil unrest are responsible for such type of risks. What is the importance of risk identification? The most important step in risk management is identifying risks. It involves generating a comprehensive list of threats and opportunities which are based on events that might prevent, enhance, accelerate, degrade, or delay the achievement of your objectives. You can’t manage risk without identifying it. But how to identify risks? One of the key steps in a proactive risk management process is to identify risks. You must look at the following sources in order to identify your project risk: Sources Description Risk registers and risk reports Provide a foundation for the evaluation of existing risks and their potential risk to an objective. Issues log It comprises of the issues and the actions considered to resolve them. Analyze the issues that were formally identified as risks. Audit reports These are the independent view of adherence to regulatory guidelines which include a review of compliance preparations, access controls, security policies, and risk management. Business Impact Analysis (BIA) It is a detailed risk analysis that is done in order to examine the nature and extent of disruptions and the likelihood of resulting consequences. Internal & external reviews These reviews are undertaken in order to evaluate the adequacy, suitability, and effectiveness of the department’s systems, and to plan for the scope of improvement.   Perspectives for Risk Management It is important to realise the perspectives for risk management and evaluate them during a program’s life continuously in order to anticipate risks at an early stage and tackle issues appropriately. Few of the risk management perspectives are as follows: Strategic level: The interdependencies of the program with other initiatives, its outcomes, and benefits realisation are affected by the strategic level changes. These changes are driven by: External factors like political, economic, social, legislative, environmental, and technical Internal political pressure Inter-program dependencies Working with third-party suppliers along with other cross-organisational initiatives can be grouped under this level. Program level: The focus of a program is to deliver benefits to an organisation that positively or negatively affects both internal and external stakeholders. Risk Management for a program must be designed to work across organisational boundaries to ensure effective engagement of stakeholders and accommodation of different interests. The principal areas of risk and issues within a program are driven by: Aggregating project threats Lack of direction from the group of leaders Lack of clarity about expected benefits and buy-in from stakeholders Complexity of outcomes You should also consider the compilations associated with working across the organisational boundaries as another factor Availability of resource Lack of certainty about funding This also includes unrealistic timelines that increase program delivery risks. Project level: Project outputs help in delivering the outcomes and benefits within a program. Focusing on the risk and issue management on project perspective is important Areas leading to the rise of project risks and issues, resource constraints, scheduling issues, and scope creep It may lead to issues and risks if the project is unsure of what it is delivering. Operational level: The transition of a project to new ways of working and new systems can lead to further sources of risk as projects deliver the outputs. The following areas can be included in the operational level perspectives: The quality of the benefit-enabling outputs from projects within program Cultural and organisational issues Output transfer to operations and the ability to cope with new ways of working The risks can further be identified in stakeholder support Industrial relations Availability of resources to support changes.   Early warning indicators for risks in project management The early warning indicators for project management can be defined as follows: In order to anticipate potential problems, there needs to be proactive risk management. These indicators offer advance warning about trends or events that can affect the outcomes of the program adversely. The sensitive risks can be tracked with the help of these indicators. Few of the early warning indicators are delays in delivery of expected or planned benefits, requests to change key program information, increase in aggregated risks, changes to organisational services, structure, and processes. Further, these indicators should be able to measure valid indicators, reviewed on a regular basis, and they should use accurate information. This ensures the effective functioning of the early warning indicators. The other methods which can be deployed to evaluate risks are as follows: Record the weighted average of the anticipated impact through the calculation of estimated monetary value. Calculate the accepted discount rate through the net present value calculation. Aggregate the risks together using a simulation technique through risk model. To conclude An experienced and certified project manager knows that every project involves identifying and managing project risks and project issues. Further, they are aware of the fact these risks and issues can be responsible for knocking a project off its track and divert the focus of the team away from fulfilling their responsibilities and goal achievements. This blog will help you to differentiate between project risk and project issues along with the key steps for identifying the risks. You will also understand the importance of risk identification and the perspectives of risk management. The blog also throws light on the early warning indicators to realise the risks in project management. This information will surely help you to realise the upcoming risk and avoid it for a smooth continuation of your project.
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Risk vs Issues [ Based on Various Factors ]

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Risk vs Issues [ Based on Various Factors ]

Can you guess a reason behind project failure? Here’s a hint. A poor risk or issue management can lead to project failure. According to PMBOK, risk can be defined as an uncertain event or condition that results in a positive or negative effect on a project’s objectives.

Whereas, an issue can be defined as an event or condition that has already happened and has impacted or currently impacting the project objectives. There are certain grounds on which we can differentiate issues from risks. Let’s take a look at the differences.

Difference between Risk & Issues

Before moving to the core differences, let’s take a look at the comparisons between examples of risk and issues through the following chart:

Risks

Issues
A critical resource might leave the project A team member resigns
Team members of the project might take vacations during the critical time of the project. No one can be confirmed when team members would take vacations.
There may be unanticipated requirement changes. New functionality has been found that needs to be added to the scope of the project.
Something new might come up after impact analysis that may push the project dates. Two new changes which are the outcome of Impact analysis resulted in pushing the project deadline by a week.

 

First of all, let’s look at the high-level difference between “Issues” & Risks”:

Difference between Risk & Issues

Now let’s see how risks & issues play an integral role in a project:

In general, if a project manager identifies all the possible negative risks and their respective response plans within the project, then the possibility of issues can be drastically reduced.  (i.e. prevention is better than cure).

However, certain unforeseen situations may still arise which turn out to be issues. They could be certain potential risks which were unidentified in the past. They could also be risks which have been already identified, where the risk response plans are inadequate- and those events turn into issues and impact the project. If a project manager pays inadequate attention to risk management, there is a greater possibility of his spending his valuable time & efforts later in managing the issues that arise!

Now, when it comes to issue management the project manager will document the issues in the “issue register” and will perform an issue analysis to identify the possible “work-arounds” to fix the issue.

For example:

Let us suppose there is a FIRE in the room.

If we consider this in the context of issue & work-around, we say that there has been an occurrence of a fire, and we need to put it off by using a fire extinguisher. Since issues are present focused, there is a very limited time available to identify the work-arounds required to fix the issue.

Once the work-arounds are identified, it’s also equally important that such issues should not get repeated in the future. There should also not be any possibility of re-occurrences in a different form, in order to bring it to a permanent closure.  In case of a re-occurrence then such events will be treated as “risks” because risks are future focused. They will be documented in the “risk register” and then sufficient risk response plans should be identified to cover those possible future risks.

What are the types of risks in Project Management?

Risks in projects are inclusive of both internal risks that are associated with the successful completion of each project as well as the risks that are beyond the project team’s control. The following are a few of the most common project risks:

  1. Cost risk:

This refers to the escalation of project costs as a result of poor cost estimating accuracy and scope creep.

  1. Schedule risk:

This refers to the risk of activities taking longer than expected. Drifting away from the schedule typically increase costs which leads to a delay of receiving project benefits and possible loss of competitive advantage.

  1. Performance risk:

This refers to the risk of failure to produce consistent results with project specifications.

types of risks in Project Management
 

There are some other risks which result in cost, schedule, or performance problems and create other types of adverse consequences for the organisation. They are as follows:

  1. Governance risk:

This risk relates to the board and management performance with regard to ethics, community stewardship, and company reputation.

  1. Strategic risks:

These risks are the result of the errors in strategy like choosing a technology that can’t be made to work.

  1. Operational risk:

These risks comprise of risks from poor implementation and process problems like production, procurement, and distribution.

  1. Market risks:

These risks comprise of risks related to foreign exchange, competition, interest rate, and commodity markets. This also includes liquidity and credit risks.

  1. Legal risks:

These risks arise because of legal and regulatory obligations which include contract risks and litigation brought against the organisation.

  1. External hazards risks:

These risks are incurred due to storms, floods, and earthquakes. Other than these, vandalism, sabotage, terrorism, labor strikes, and civil unrest are responsible for such type of risks.

What is the importance of risk identification?

The most important step in risk management is identifying risks. It involves generating a comprehensive list of threats and opportunities which are based on events that might prevent, enhance, accelerate, degrade, or delay the achievement of your objectives. You can’t manage risk without identifying it.

But how to identify risks?

One of the key steps in a proactive risk management process is to identify risks. You must look at the following sources in order to identify your project risk:

Sources

Description
Risk registers and risk reports Provide a foundation for the evaluation of existing risks and their potential risk to an objective.
Issues log It comprises of the issues and the actions considered to resolve them. Analyze the issues that were formally identified as risks.
Audit reports These are the independent view of adherence to regulatory guidelines which include a review of compliance preparations, access controls, security policies, and risk management.
Business Impact Analysis (BIA) It is a detailed risk analysis that is done in order to examine the nature and extent of disruptions and the likelihood of resulting consequences.
Internal & external reviews These reviews are undertaken in order to evaluate the adequacy, suitability, and effectiveness of the department’s systems, and to plan for the scope of improvement.

 

Perspectives for Risk Management

It is important to realise the perspectives for risk management and evaluate them during a program’s life continuously in order to anticipate risks at an early stage and tackle issues appropriately. Few of the risk management perspectives are as follows:

Strategic level:

The interdependencies of the program with other initiatives, its outcomes, and benefits realisation are affected by the strategic level changes.

These changes are driven by:

  • External factors like political, economic, social, legislative, environmental, and technical
  • Internal political pressure
  • Inter-program dependencies
  • Working with third-party suppliers along with other cross-organisational initiatives can be grouped under this level.

Program level:

The focus of a program is to deliver benefits to an organisation that positively or negatively affects both internal and external stakeholders. Risk Management for a program must be designed to work across organisational boundaries to ensure effective engagement of stakeholders and accommodation of different interests. The principal areas of risk and issues within a program are driven by:

  • Aggregating project threats
  • Lack of direction from the group of leaders
  • Lack of clarity about expected benefits and buy-in from stakeholders
  • Complexity of outcomes
  • You should also consider the compilations associated with working across the organisational boundaries as another factor
  • Availability of resource
  • Lack of certainty about funding
  • This also includes unrealistic timelines that increase program delivery risks.

Project level:

Project outputs help in delivering the outcomes and benefits within a program.

  • Focusing on the risk and issue management on project perspective is important
  • Areas leading to the rise of project risks and issues, resource constraints, scheduling issues, and scope creep
  • It may lead to issues and risks if the project is unsure of what it is delivering.

Operational level:

The transition of a project to new ways of working and new systems can lead to further sources of risk as projects deliver the outputs.

The following areas can be included in the operational level perspectives:

  • The quality of the benefit-enabling outputs from projects within program
  • Cultural and organisational issues
  • Output transfer to operations and the ability to cope with new ways of working
  • The risks can further be identified in stakeholder support
  • Industrial relations
  • Availability of resources to support changes.

Operational level:
 

Early warning indicators for risks in project management

The early warning indicators for project management can be defined as follows:

  • In order to anticipate potential problems, there needs to be proactive risk management. These indicators offer advance warning about trends or events that can affect the outcomes of the program adversely.
  • The sensitive risks can be tracked with the help of these indicators.
  • Few of the early warning indicators are delays in delivery of expected or planned benefits, requests to change key program information, increase in aggregated risks, changes to organisational services, structure, and processes.
  • Further, these indicators should be able to measure valid indicators, reviewed on a regular basis, and they should use accurate information. This ensures the effective functioning of the early warning indicators.

The other methods which can be deployed to evaluate risks are as follows:

  • Record the weighted average of the anticipated impact through the calculation of estimated monetary value.
  • Calculate the accepted discount rate through the net present value calculation.
  • Aggregate the risks together using a simulation technique through risk model.

To conclude

An experienced and certified project manager knows that every project involves identifying and managing project risks and project issues. Further, they are aware of the fact these risks and issues can be responsible for knocking a project off its track and divert the focus of the team away from fulfilling their responsibilities and goal achievements.

This blog will help you to differentiate between project risk and project issues along with the key steps for identifying the risks. You will also understand the importance of risk identification and the perspectives of risk management. The blog also throws light on the early warning indicators to realise the risks in project management. This information will surely help you to realise the upcoming risk and avoid it for a smooth continuation of your project.

KnowledgeHut

KnowledgeHut

Author

KnowledgeHut is a fast growing Management Consulting and Training firm that is a source of Intelligent Information support for businesses and professionals across the globe.


Website : https://www.knowledgehut.com/

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It is done by using the principle of Management by Exception.The structure that eventually forms comprises of four levels, where Corporate level is outside the project borderlines:Corporate: It is responsible for:Commissioning the project in the first placeAppointing the Project Executive  Defining the project level tolerances to be followed by the project boardDirecting: It is undertaken by the project board, which is responsible for:Overall direction and supervision of the projectAccountable for the project’s successThey approve all the major plansThey approve completion of each stageThey authorize the start of the next stageCommunicating with the stakeholdersAuthorizing any deviation that exceeds the project level tolerancesManaging: Project Manager comes under this level and is responsible for:The day-to-day management of the project within the parameters set by the project boardTo make sure that the products are being delivered according to the time, cost, quality, scope of risk and benefit objectivesDelivering: Team Managers come under this level and are responsible for:Delivering the project’s products with the desired quality standards and within a specified time frame and costTo summarize these components, we can conclude that each project should have direction, management, control and communication within its structure and project team for providing better and fruitful outcomes.THE PREDEFINED ROLES IN A PROJECTThe PRINCE2® methodology is based on processes and division of stages for improved performance. It also brings along a series of defined roles with specific tasks designated to them. The predefined roles in a project based on a PRINCE2® environment are:Project Board - It is a group of professionals that includes :Executive: The executive has the custody of the business case and is the person ultimately taking responsibility for the project.Senior User: This position can be held by an individual or a group of professionals. Their primary objective is to represent the demands of the final user.Senior Supplier: This position can also be assigned to one or more individuals. Their responsibility is to ensure the representation of the interests of the suppliers.Project Assurance: The primary goal of Project Assurance is to make sure that the interests of the stakeholders are met.Change Authority: They are responsible for deciding the major change requests on behalf of the Project Board.Project Manager: The person responsible for undertaking the day-to-day supervision of the project on behalf of the Project Board.Project Support: It is the body responsible for assisting the Project Manager in the Project Management tasks and duties.Team Manager: This position can be assigned to one or more professionals that ensure the quality and other elements of production in the various teams that focus on a particular skill or knowledge from various departments.1. Roles Associated with the Project BoardThe project board represents the direction level of the project and consists of the following roles : a. The Executive: The executive actually owns the business case and his role is that of a business-oriented leader who is ultimately accountable for the project. The executive also has the authority of delivering the final words and decisions that are taken in the project. Thus, the project board doesn’t demonstrate any signs of democracy and equal decision-making rights.The executive is appointed by the corporate of programme management, he is the one responsible for the project with additional support from the Senior User and Senior Supplier. The executive is also responsible for designing and appointing the project management team, including the rest of the project board and also appoints the project manager b. The Senior User: It represents the final user’s requirements in the board. It specifies the needs of the user that will use the finished product or service and also establishes communication between the project management team and the users, and ensuring that the products will cater to the needs of the users, especially the quality of the product or service and ease of use. It also supplies benefits information for the Benefit Review Plan. c. The Senior Supplier: It represents the interests of the supplier. It represents the interests of those designing, developing, facilitating and implementing the project’s product and services, they provide supply to the project and make sure that only the right tools, people, equipment and expertise are in place. They also ensure that the product meets the expected criteria including the quality criteria.   Only one person can be the executive, but both the other two roles i.e the senior user and the senior supplier can be assigned to one or multiple individuals.Associated DutiesThe project board is responsible for holding accountability for the success and the failure of the project.Another duty is to provide unified direction to the project and the respective Project Manager.The project board also provides the resources and also authorizes funds utilized in the project.They should also provide additional visible and continuous support and assistance to the Project Manager.They ensure that there is effective communication within the project team and with external stakeholders.In real life, there are many organizations that have a project board that is incapable of handling projects or is either inexperienced or not at all interested in the project itself. This is a serious issue and a major drawback that could sabotage the entire project and the team associated. Henceforth, a great project board is a must to ensure that the direction is on point and effective. 2. The Project Assurance RoleIt is the responsibility of the Project Board to ensure that the project performs well and the products/services are produced, this is known as the Project Assurance. The board usually checks it directly through the Project Manager. But in large projects, many of the board members are busy with their respective tasks. Thus, the board can delegate this responsibility to someone else. The basic method is to double-check the information and this is called Project Assurance.It monitors the performance of the project and provides assistance to the Project Manager by giving insights on corporate-related issues. That’s how the board uses its Project Assurance responsibility to ensure that everything is going according to plan and the Project Manager is up to date with corporate regulations.Different board members have their respective Project Assurance responsibilities. For example:The Executive is responsible for Business Assurance (Business Value)The Senior User is responsible for the User AssuranceThe Senior Supplier is responsible for the Supplier’s Assurance 3. The Change Authority Role The responsibilities associated with the Change Authority are as follows:This role lies under the Project Team Management.The Project Board may decide if an individual should be appointed or an entire group is required to undertake this role.The primary objective of  Change Authority is to review the requests for change or the off-specifications related to the project.The Change Authority is also capable of delegating responsibility to a number of levels depending on the intensity and the complexity of the change.Asperity of Change RequestDecided ByLevel 1Project Support / Help DeskLevel 2Project ManagerLevel 3Change AuthorityLevel 4Project BoardLevel 5Corp / Programme ManagementIf smaller changes are expected in a project then the Project Board can handle them. But when many major changes are expected then it is more efficient to use a separate Change Authority group.A separate Change Authority group simplifies the change process and saves the Project Board from all the hassle. 4. The Project Manager RoleThe Project Manager role has the following impact on the project:Their primary objective is to manage the project on a daily basis. Their main focus is on the day-to-day progress of the project.This particular position of a Project Manager can never be shared and only one is appointed for a particular project.The Project Manager runs and supervises a project on behalf of the Project Board within a few specified constraints and collaborates throughout the project with the Project Board and the Project Assurance.In the case of PRINCE2®, it is usually preferred that the Project Manager belongs to the customer side.The Project is also responsible for running all the principal processes except Directing a Project Process (DP).The Project Manager is responsible for the Project Support and assistance and also the Team Managers.In several smaller projects, where there are no Team Managers, the Project Manager can manage the team members directly. Additionally, in cases where there is project support, the support task is completely on the shoulders of the Project Manager.5. The Team Manager RoleThe role of a Team Manager is actually optional and not necessary in smaller projects. The role  of a Team Manager only comes into the scene if:The Project is quite huge and requires a lot of members. Thus, a number of Team Members would be required to manage and supervise several teams from different departments and expertise.Team Managers are usually required for a specific skill, skillset or knowledge of the products to be produced. For example, a project requires an individual with great expertise of JAVA to provide assistance in handling and developing the applications or programs or researching on a particular product.They are also the need of the hour when the project is affected by geographical reasons. The project might include remote teams that provide assistance from remote locations, then that particular remote team is managed by a Team Manager.If the project is using an external company, then it would be easier to coordinate with the Team Manager rather than all the team members directly and individually.6. The Project Support RoleThe project support role offers the following services to the project:The Project Support provides administrative services to provide assistance to the Project Manager in the form of filing, distributing documents, adding documents to an IT System, etc.Project support also advises and offers guidance regarding the use of project management tools and configuration management.The Project Support also provides additional assistance in planning and risk management. For example, keeping the planned documents up to date and also highlighting what has been completed and what aspects of the projects are delayed.The prominent responsibility of the Project Support is Configuration Management and following the guidelines under the Configuration Management Strategy Document: it is one of the four strategy documents formulated at the beginning of the project.The responsibility of the Project Support is under the authority of the Project manager. To put forward in simple words, the Project Manager is responsible for the administrative duties associated with the project. Therefore, this role is not optional, however, the Project Manager can delegate this responsibility to another person or group.In a case, where the Project Manager is unable to delegate this role to someone else, it is the responsibility of the Project Manager to assume the role of the Project Support. This is the reason why we see many Project Managers working late in the evening and doing overtime. As they are trying to catch up on their administrative tasks and keep forgetting to plan all this in their normal working hours.STAGE-WISE MANAGEMENTA great way of handling a big and chunky task or project is to divide it into smaller and manageable fragments. This is the same methodology implemented in the PRINCE2® method of project management. But, instead of chunks or fragments, in PRINCE2® a different terminology is used, i.e. stages - Management Stages. The PRINCE2® methodology focuses on running and operating a project under a planned and controlled environment through a stage by stage basis.These stages are separated and decided by the Project Board on the basis of Decision Points. After the completion of each stage, the Project Board assesses the performance of the previous stage, analyzes the plans for the next stage, and ultimately decides whether to proceed to the next stage or not. The higher the number of stages, the more control is possessed by the Project Board, but it also increases their workload. Fewer stages in a project require less amount of work from the Project Board which indicates that the Senior Management will have less control over the project.  The division of a project into stages has some advantages as mentioned below:It allows the project to be divided into smaller and simpler fragments that can be easily managed.It leads to a high-level plan for the project and a very detailed Stage Plan.It also incorporates learning from the previous stages while devising a plan for the upcoming stages.There should be a minimum of two management stages in a project under a PRINCE2® project environment:The Initiation StageThe Management StageThe Closing a Project process is the last part of the second stage in a two-stage project.In this manner a particular PRINCE2® project is controlled, managed, and monitored on a stage by stage basis.
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PRINCE2® Roles and Responsibilities [Major &am...

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