Risk Response Strategies
Risk Response Strategies
The risk response planning involves determining ways to reduce or eliminate any threats to the project, and also the opportunities to increase their probability and/or impact. Project managers should work to eliminate the threats before they occur. Similarly, the project managers should work to ensure that opportunities occur. Likewise, the project manager is also responsible to decrease the probability and impact of threats and increase the probability and impact of opportunities.
For the threats that cannot be mitigated, the project manager needs to have a contingency plan and also a response plan if contingencies do not work.
It is not required to eliminate all the risks of the project due to resource and time constraints. A project manager should review risk throughout the project. Planning for risks is iterative. Qualitative risk, quantitative risk, and risk response planning do not end ones you begin work on the project.
Dealing with project threats
- Avoid, it’s when the project team acts to eliminate the threat or protect the project from its impact, it’s suitable for high priority threats with high probability of occurrence and large negative impact on the project objectives. Eliminate the threat by eliminating the cause, such as removing a work package or changing the person who will do the work. It may involve changing some aspect of the project management plan or changing the objective in order to eliminate the threat, or reducing its probability to zero.
- Mitigate, in this response strategy, action is taken to reduce the probability of occurrence and/or impact of a threat. It may involve prototype development to reduce the risk of scaling up from a bench scale model of a process or product. Where it’s not possible to reduce the probability, a mitigation response might reduce the impact by targeting factors that drive the severity.
- Transfer, it involves shifting ownership of a threat to a third party to manage the risk and to bear the impact if the threat occurs. It involves payment of a risk premium to the party taking on the threat. Transfer can be achieved by a range of actions which includes the usage of insurance, warranties, performance bonds and guarantees.
- Acceptance, It acknowledges the existence of a threat , but no proactive action is taken , It’s appropriate for low priority threats and it may be adopted where it is not possible or cost-effective to address a threat in any other way :
- Active Acceptance, Establish a contingency reserve, including amount of time, money or resources to handle the threats if it occurs.
- Passive Acceptance, involves no proactive action apart from periodic review of the threat to ensure that it doesn’t change significantly.
Dealing with project opportunities
- Exploit, It may be selected for high-priority opportunities where the organization wants to ensure that the opportunity is realized , it seeks to capture the benefit associated with a particular opportunity by ensuring that it definitely happens by increasing the probability of occurrence to 100% .
- Enhance, It is used to increase the probability and/or impact of an opportunity, the probability of occurrence of an opportunity may be increased by focusing attention on its causes, where it is not possible to increase probability, an enhancement response might increase the impact by targeting factors that drive the size of the potential benefit.
- Share, It involves transferring ownership of an opportunity to a third party so that it shares some of the benefit if the opportunity occurs , It’s important to select the new owner of a shared opportunity carefully so they are best able to capture the opportunity for the benefit of the project.
- Acceptance, It acknowledges the existence of an opportunity , but no proactive action is taken , It’s appropriate for low priority opportunities and it may be adopted where it is not possible or cost-effective to address an opportunity in any other way :
- Active Acceptance, Establish a contingency reserve, including amount of time, money or resources to handle the opportunity if it occurs.
- Passive Acceptance, involves no proactive action apart from periodic review of the opportunity to ensure that it doesn’t change significantly.
For the PMI-RMP exam, expect to see questions describing a risk response strategy the project manager used in a specific scenario and the question will ask you about the risk response type the project manager used.
Outputs Of Plan Risk Responses will be risk register, project management plans and project documents need to be updated as outputs of Plan Risk Responses.
- Project Management Plan Updates
Project Management Plan can be updated by new work activities/packages that could be added, removed, or assigned to different resources, thus, making planning an iterative process.
2. Risk Register Updates
- Residual Risks:There are risks that remain after completion of risk response planning. Residual risks are those risks that are accepted and contingency plans are developed.
- Contingency plans: They describe the specific actions that can be taken if the specific opportunity or threats occur.
- Risk response owners: Risks can be assigned to individuals who can develop risk responses and also who will implement risk responses if those opportunities or threats occur.
- Secondary Risks: These are those risks which may be created due to the implementation of current risk responses
- Risk triggers: The events that trigger the contingency response are risk triggers
- Contracts: The contracts issued to deal with risks should be noted in the risk register.
- Fall back plans: Specific actions that are taken if contingency plans (or risk response plans) are not effective
- Reserves (contingency): Reserves are necessary for both time and cost risk