 Risk of ERP

Enterprise Resource Planning (ERP) systems are critical

tools that streamline business operations and improve
overall efficiency. However, implementing a new ERP
system is a complex and challenging task that requires
significant planning, resources, and expertise.

Unfortunately, many businesses underestimate the risks

associated with ERP implementation and fail to
adequately prepare for potential setbacks.

But first, let’s start with the basics– What are the ERP implementation risks?

 What Are the ERP Implementation Risks?

ERP (Enterprise Resource Planning) implementation is a complex and crucial process that involves
integrating various business functions into a single system.

While an ERP system can bring numerous benefits, such as increased efficiency, improved productivity,
and better decision-making, its implementation can also pose significant risks that can impact the
project’s overall success.

Some of the most common risks of implementing an ERP system include inadequate planning, poor data
quality, lack of user training, resistance to change, and insufficient vendor support.

These risks can lead to cost overruns, delays, system failures, and low user adoption– ultimately causing
implementation failure.

For these reasons, it’s essential to identify and mitigate these risks to ensure a successful ERP
implementation that meets your business needs and goals.

 20 ERP Implementation Risks that Every Business Should Know

Here are the top 20 ERP implementation challenges that could harm your business operations and brand
reputation. But worry not, we have also provided solutions to each of them. Let’s take a closer look at
each one.

Risk #1: Poor project management and planning

Poor project management and planning can lead to ERP implementation failure. A lack of clear timelines
and milestones can cause confusion between team members. This can result in delays and budget
overruns, among other downsides. In other words, a well-planned and well-executed project
management strategy is crucial for the success of an ERP implementation.

Prof. Adeshsinh. R. Khatwa ( CA-Final, M.com(Gold-Medalist & Ranker ), MBA-Ranker,

DTP-Ranker, Pursuing US-CPA, LLB ) M : – 8000107049
 Solution: A project manager should clearly understand the project scope and goals, and ensure that all
team members are on the same page. Also if there are any changes in terms of requirements, timeline
or milestones, it must be communicated to relevant stakeholders immediately.

Risk #2: Inadequate user training and support

Inadequate user training and support is one of the major and most common ERP implementation risks.

Employees may find it hard to adapt to the new system– which leads to declined productivity. Also, if
they are not trained properly, they may be reluctant to use the ERP system or may use it incorrectly.

Solution: To mitigate this risk, you should provide comprehensive training to all employees who will use
the ERP system. This training should cover technical guidance on how the system fits into their daily
work routines.

Proper training will help employees use the ERP solution efficiently, minimizing implementation
challenges.

Risk #3: Resistance to change from employees

Resistance to change from employees is also one of the common risks of implementing an ERP system.
It’s quite typical for employees to resist changes that may impact their job roles or existing processes.
Also, resistance to change can lead to delays in the implementation and even project failure.

Solution: To mitigate this risk, you need to communicate with employees early about the coming
changes. You also need to involve them in the planning process and get their feedback to ensure they
feel heard and valued.

Eventually, by addressing employee concerns and making them part of the process, you can certainly
reduce resistance to change.

Risk #4: Limited stakeholder involvement

Limited stakeholder involvement is another major ERP implementation
risk. If key stakeholders and decision-makers are not involved in the
process– it can lead to future problems and failed implementation.
Solution: To mitigate this risk, you must involve stakeholders from the
start and throughout the implementation process.

Keep them informed and engaged, with regular updates on progress,

challenges, and decisions. This involvement can ensure a successful ERP
implementation and minimize the risk of mismatched expectations and
delays.

Risk #5: Lack of alignment between ERP system and business processes
Another major ERP risk is the lack of alignment between the ERP system and business processes. This
usually happens when the ERP software is not tailored to fit the business’s specific needs. This can result
in inefficiencies, data inaccuracies, and decreased productivity.

Prof. Adeshsinh. R. Khatwa ( CA-Final, M.com(Gold-Medalist & Ranker ), MBA-Ranker,

DTP-Ranker, Pursuing US-CPA, LLB ) M : – 8000107049
 Solution: To mitigate this risk, you must assess the business’s requirements and align them with the ERP
system. This involves customizing and configuring the ERP system to fit the specific needs of the
business.
Ultimately, a proper alignment between the ERP solution and business processes ensures the effective
implementation of ERP.

Risk #6: Data quality and integrity issues

The 6th and one of the most significant ERP implementation
risks is data quality and integrity issues. When data is migrated
from legacy systems to the new ERP system, it can result in
inconsistencies, data loss or corruption. This will lead to
inaccurate reporting and reduced productivity.
Solution: To mitigate this risk, you must thoroughly test the
data migration process and perform data cleansing activities
before the migration. This ensures that data is accurate,
complete, and consistent across the ERP system.

In addition, regular data quality checks and maintenance activities should be performed to ensure data
remains accurate and consistent.

Risk #7: Insufficient testing and quality assurance measures

Insufficient testing and quality assurance measures are two other major ERP implementation risk
factors.

When testing is flawed, critical issues may go undetected, leading to system failures, data loss, or other
negative impacts. This can result in significant financial losses, declined productivity, and damage to the
organization’s reputation.

Solution: To mitigate this risk, it is crucial to conduct comprehensive testing and quality assurance
measures throughout the ERP implementation process. This includes testing all system components,
such as hardware, software, and network infrastructure. This will certainly help you minimize the risk of
system failures.

Risk #8: Integration challenges with existing applications

The next major ERP risk on our “Top 20 ERP
Implementation Risks” list is integration challenges with existing
applications. It is quite possible that the best ERP software you
chose may not be compatible with some of your existing
applications. This will result in data inconsistencies and
additional manual work.

Solution: To mitigate this risk, it’s essential to thoroughly assess

the existing applications to identify their compatibility with the
ERP system. You should also consider customizing the ERP
system or developing integration tools to ensure smooth
integration with existing applications.

Prof. Adeshsinh. R. Khatwa ( CA-Final, M.com(Gold-Medalist & Ranker ), MBA-Ranker,

DTP-Ranker, Pursuing US-CPA, LLB ) M : – 8000107049
 Risk #9: Difficulty in customizing and configuring the ERP system
Difficulty in customizing and configuring the ERP system is another one of the common ERP
implementation risks. Customizing and configuring the system to align with specific business
requirements can often be challenging– leading to system failure.

Solution: To mitigate this risk, it is important to customize and configure the ERP system in a structured
manner. For that, you will need constant communication with each team and stakeholder.
Prioritizing the customization and configuration of the ERP system helps you achieve desired results as
well as get a competitive edge.

Risk #10: Limited vendor support and maintenance

Limited vendor support and maintenance is another major ERP implementation risk. We all agree that it
is essential to have reliable and timely support from the vendor during the implementation phase of the
ERP system. In fact, not only during the implementation but also during the maintenance phase.

Solution: To mitigate this ERP risk factor, always choose a vendor that offers comprehensive support.
This should include regular updates, bug fixes, and training. Remember that quality vendor support not
only ensures the full benefits of the ERP system but also eliminates negative impacts on business
operations.

Risk #11: Unclear or unrealistic project scope and goals

Unclear or unrealistic project scope and goals is one of the
most common ERP implementation risks. For this reason, it’s
important to define a clear project scope and goals to ensure
that the ERP system aligns with your business objectives.

Solution: To address this ERP implementation risk, conduct a

thorough analysis of your business requirements and
determine the scope and goals of the project. Note that the
project goals should be realistic, achievable, and measurable.
A well-defined project scope and goals will certainly help you
achieve your desired goals.

Risk #12: Budget overruns and unexpected expenses

Budget overruns and unexpected expenses are significant ERP implementation risks that can impact
your organization’s financial stability. You must know that ERP solutions can be complex and require
significant investment in hardware, software, and implementation services.

Solution: To address this risk, it’s important to create a realistic budget considering all the costs
associated with the ERP system, including hardware, software, implementation services, training, and
maintenance. Additionally, consider all the potential unexpected expenses and build a contingency fund
to address them.

Risk #13: Inaccurate or incomplete data migration

Inaccurate or incomplete data migration is one of the critical ERP implementation challenges that can
impact your business operations. Data migration involves transferring data from the old system to the
new ERP system, which can be a complex and time-consuming process.

Prof. Adeshsinh. R. Khatwa ( CA-Final, M.com(Gold-Medalist & Ranker ), MBA-Ranker,

DTP-Ranker, Pursuing US-CPA, LLB ) M : – 8000107049
 Solution: To mitigate this risk, it’s essential to have a robust data migration strategy. This involves
identifying the data to be migrated, verifying its accuracy, and mapping it to the new system.
Additionally, you must have a backup plan in case data migration fails for whatever reason.

Risk #14: Security vulnerabilities and risks

Security vulnerabilities and threats are significant ERP
implementation risks that can affect your business data as
well as operations. One of the major reasons ERP systems
are always on the radar of unethical hackers is that it holds
valuable business data and confidential information.

Solution: To mitigate this ERP Security Issues, you must

perform a comprehensive security assessment to identify
potential vulnerabilities and implement appropriate security
measures. Besides, ensure that your staff is trained in
security best practices and that you have a comprehensive
incident response plan in place.

Risk #15: Performance and scalability issues

The next major ERP implementation risk factors on our list are performance and scalability issues. As
your business grows, the ERP system may not be able to handle increased data volume and user activity,
leading to system slowdowns and potential downtime.

Solution: To address this ERP implementation risk, plan for scalability from the beginning. Ensure that
the ERP platform can handle increased user activity and data volume. Besides, carry out regular
performance testing and take care of the system’s configuration and infrastructure.

All of these exercises will help you improve your performance and stability.

Risk #16: Compatibility issues with hardware and software

Another common ERP risk is compatibility issues with hardware and
software. However, if this issue is not addressed on time and in an
effective manner, it can lead to a system breakdown impacting your
operations significantly.

Solution: To mitigate this risk, you must conduct a thorough analysis

of your existing hardware and software, ensuring that they meet
the new ERP system’s requirements. Additionally, work with the
ERP vendor to identify any potential compatibility issues and
develop a plan to address them.

Risk #17: Legal and regulatory compliance challenges

Legal and regulatory compliance challenges are the 17th most significant ERP implementation risks for
your organization. You must know that non-compliance not only results in legal penalties and fines but
also reputational damage to your business.

Prof. Adeshsinh. R. Khatwa ( CA-Final, M.com(Gold-Medalist & Ranker ), MBA-Ranker,

DTP-Ranker, Pursuing US-CPA, LLB ) M : – 8000107049
 Solution: To address this ERP implementation risk, you must have adequate knowledge about relevant
laws and regulations that apply to your business operations. Also, perform regular audits to ensure
compliance with legal and regulatory requirements.

All these best practices will help you avoid any negative impact on your business operations and
maintain your reputation in the market.

Risk #18: Loss of productivity after the implementation

After implementing an ERP system, there may be a temporary loss
of productivity as employees adjust to the new system. This can
occur because employees may not be familiar with the new
interface or may require training on how to use the new software.

Solution: To address this issue, provide employees with adequate

training on how to use the new system. Also, offer required support
and resources during the transition period. Besides, companies
should also conduct regular performance monitoring to identify and
address any issues affecting employee productivity.

Risk #19: Poor documentation and knowledge transfer

Poor documentation and knowledge transfer are also common ERP implementation risks. Without clear
documentation standards and processes, organizations may struggle to manage and maintain their ERP
system effectively. It also causes delays and confusion among employees, leading to poor decision-
making.

Solution: To address this ERP implementation risk, it is important to establish documentation standards
and use document management tools. Also, ensure that employees regularly update and maintain
documentation to keep the information accurate and up-to-date. Additionally, embrace effective
knowledge transfer strategies to ensure that information is shared among employees safely.

Risk #20: Inability to achieve expected business benefits

The last significant ERP implementation risk is the inability to
achieve expected business benefits. Organizations face this risk
typically when the implemented new ERP software fails to meet the
organization’s expectations. It can be caused by poor system
configuration, insufficient training, or poor integration with existing
systems.
Solution: To mitigate this ERP implementation risk, you must have a
clear understanding of the organization’s objectives and
requirements before you begin the ERP implementation. Also,
conduct a thorough analysis of the organization’s operations, define
clear goals for the ERP system, plan employee training programs,
and so on.

Expert Advice: ERP implementation does come with its own set of risks, such as poor project
management, insufficient employee training, unclear project scope, budget overruns, and so on.
However, if you follow the tips provided above, you will be able to overcome these obstacles and ensure
proper ERP implementation.

Prof. Adeshsinh. R. Khatwa ( CA-Final, M.com(Gold-Medalist & Ranker ), MBA-Ranker,

DTP-Ranker, Pursuing US-CPA, LLB ) M : – 8000107049