ERP Implementation, it's Risks & Related Controls

ERP system implementation is a huge task and requires lot of time, money and above all patience.

The success or failure of any ERP is dependent on its successful implementation and once implemented proper usage.

People,

CHANGE MANAGEMENT

Risk Associated

Control Required

job profile will be changed and some new jobs created.

Proper training of the users, practical hand

on experience and well documented manuals.

TRAINING

Risk Associated

Control Required

Normally training takes place towards the end of the ERP implementation cycle, management may curtail the training due to

increase in the overall cost budget.

Training is a project-managed activity and shall be imparted without fail.

STAFF TURNOVER

Risk Associated

Control Required

Since job profile change, system will be difficult to understand. Employee turnover during the implementation and transition

phases can affect the organization.

This can be controlled and minimized by allocation of employees to tasks matching their skill-set; fixing of compensation

package and other benefits accordingly.

TOP MANAGEMENT SUPPORT

Risk Associated

Control Required

ERP implementation will fail if the top management does not provide the support.

The ERP implementation shall be started only

after the top management is fully convinced and assure of providing the full support.

CONSULTANTS

Risk Associated

Control Required

These are experts in the implementation of the ERP package and might not be familiar with the internal workings and

organizational culture.

The consultants should be assigned a liaison officer - a senior manager – who can familiarize them with the company and its

working.

Process Risks: One of the main reason for ERP implementation is to improve, streamline and make the business process more efficient, productive and effective.

PROGRAM MANAGEMENT

Risk Associated

Control Required

There could be a gap between day-to- day

management activities and ERP-enabled

functions like materials and procurement planning, logistics and manufacturing.

This requires bridging the information gap between ERP-based functions and operational management functions.

BUSINESS PROCESS REENGINEERING (BPR)

Risk Associated

Control Required

BPR means not just change

– but dramatic change and dramatic improvements.

This requires overhauling of organizational structures, management systems, job descriptions, training and

use of IT.

Technological Risks: The organizations implementing ERP systems should keep abreast of the latest technological developments and implementation which is required to survive and thrive.

SOFTWARE FUNCTIONALITY

RISK ASSOCIATED

CONTROL REQUIRED

ERP systems offer many features and functions, not all organizations require all features. Implementing all the functionality and features can be disastrous for an

Organization.

Care should be taken to incorporate the features that are required by the organization and additional features that might be required at a future date.

TECHNOLOGICAL OBSOLESCENCE

RISK ASSOCIATED

CONTROL REQUIRED

With the advent of more efficient technologies every day, the ERP system also becomes obsolete as time goes on.

This requires critical choice of technology, architecture of the product, ease of enhancements, ease of upgrading, quality of

vendor support.

ENHANCEMENT & UPGRADES

RISK ASSOCIATED

CONTROL REQUIRED

ERP Systems are not upgraded and kept up- to- date. Patches and upgrades are not

installed and the tools are underutilized.

Care must be taken while selecting the vendor and upgrade/support contracts

should be signed to minimize the risks.

Other Implementation Issues: Many times, ERP implementations are withdrawn because of the following factors.

LENGTHY IMPLEMENTATION TIME

RISK ASSOCIATED

CONTROL REQUIRED

ERP projects are lengthy that takes

anywhere between 1 to 4 years depending upon the size of the organization.

Care must be taken to keep the momentum

high and enthusiasm live amongst the employees, so as to minimize the risk.

INSUFFICIENT FUNDING

RISK ASSOCIATED

CONTROLS REQUIRED

The budget for ERPimplementation is generally allocated without consulting experts and then implementation is stopped

along the way, due to lack of funds.

It is necessary to allocate necessary funds for the ERP implementation project and then allocate some more for contingencies.

SPEED OF OPERATION

RISK ASSOCIATED	CONTROLS REQUIRED
As data is maintained centrally, gradually the data size becomes more and more and it may reduce the speed of operation.	This can be controlled by removing redundant data, using techniques like data warehousing and updating hardware on a continuous basis.

SYSTEM FAILURE

RISK ASSOCIATED	CONTROLS REQUIRED
As everybody is connected to a single system and central database, in case of failure of system, the whole business may come to stand still may get affected badly.	This can be controlled and minimized by having proper back up of data as well as hardware.

DATA SAFETY

RISK ASSOCIATED

CONTROLS REQUIRED

As there is only one set of data, if this data is lost, whole business may come to stand still.

Back up arrangement needs to be very

strong. Also, strict physical control is needed for data.

DATA ACCESS

RISK ASSOCIATED

CONTROLS REQUIRED

Data is stored centrally and all the departments access the central data. This creates a possibility of access to non-relevant

data.

Access rights need to be defined very carefully and to be given on“Need to know” and Need to do” basisonly.

Post Implementation issues:ERP operation and maintenance requires a lifelong commitment by the company management and users of the system.

LIFELONG COMMITMENT

RISK ASSOCIATED	CONTROLS REQUIRED
Even after the ERP implementation, there will always be new modules/versions to install, new persons to be trained, new technologies to be embraced, refresher courses to be conducted and so on.	This requires a strong level of commitment and consistency by the management and users of the system.

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