Project Management

Five Strategies for Risk Response

Once risks have been identified, there are a number of options that the project manager should consider for responses.

• Leave it. In this approach, the project manager looks at the risk and decides to do nothing. This can happen for a couple reasons.

1. The project manager may feel that the risk should be managed, but that the negative impact of the risk is not worth the cost and effort required to manage the risk. In this case you would rather deal with the costs of the risk occurring that the cost of trying to manage the risk.

2. There may not be any reasonable and practical activities available to manage the risk. This is different from the prior reason where the cost was more than the benefit. In this case, there is no practical way to manage the risk, even if the risk has been identified as high. For instance, it is possible that there is a risk of your sponsor leaving and a new sponsor canceling the project. In fact, you may know that the sponsor is up for a promotion and that this scenario has some possibility of occurring. However, you may not be in a position to do much about it as long as the current sponsor is in place, and you may just need to leave it and see how events play out.

• Monitor the risk. In this case, the project manager does not proactively manage the risk, but monitors it to see whether it is more or less likely to occur as time goes on. If it looks more likely to occur, the team must formulate a different response at a later time. This approach can work for serious risks that are not likely to occur. Rather than put a plan in place immediately, the project manager creates a plan only if it looks likely that the risk will occur. The advantage is that scarce resources are expended only on those risks that are likely to occur. The disadvantage is that the delay in addressing the risk might make it less likely that the risk can be successfully managed in the future.

This is also a good approach if you have identified a risk that should be managed, but the risk event is far off in the future. For instance, if your risk event is nine months in the future, it may not make sense to spend resources to manage the risk at this time. A better approach might be to monitor the risk on a monthly basis. It is possible that over time the risk will go away because of other circumstances. However, if it does not go away, the team will still need to manage the risk in the coming months.

• Avoid the risk. Avoiding the risk means that the condition that is causing the problem is eliminated. One example is that if you find that a part of the project has high risk associated with it, that whole part of the project is eliminated. The risks associated with a particular vendor, for instance, might be avoided if another vendor is used instead. This is a very effective way to eliminate risks but obviously can be used only in certain unique circumstances. In another example, you may have a project risk associated with implementing a solution in multiple locations. Once the risk is identified, the sponsor may change the scope of the project to only implement in one location. In this way, the risk of implementing at multiple locations has been avoided.

• Move the risk. In some instances, the responsibility for managing a risk can be removed from the project by assigning the risk to another entity or third party. For instance, outsourcing a function to a third party might eliminate that risk for the project team. The third party might have particular expertise that allows them to do the work without the risk. Even if the risk is still present, it now is up to another party to resolve.

Another example of moving the risk is buying insurance. In a simple example, you may have a very fragile and valuable piece of equipment that needs to be shipped to your project team. There is some risk that the material will be damaged. You might move the financial risk by purchasing insurance on the shipment. Of course, if the shipment is damaged, you may still lose time waiting for a replacement part to be shipped. However, you no longer have the financial risk. In exchange for an insurance premium payment, the insurer now has the financial risk.

• Mitigate the risk. In most cases, this is the approach to take. Mitigating the risk means that you put in place a set of proactive steps to ensure that the risk does not occur, or that the impact of the risk event in minimized. Both are valid mitigation strategies. (For the purposes of the Project Management Process, it is generally assumed that Risk Management Plans are put in place to mitigate the risk.)

Weekly Anagram

Let's have some fun! See if you can unravel this anagram. (Anagrams are a word or phrase formed by reordering the letters of another word or phrase, such as satin to stain.)

Conditional logic. Alternative paths in a probabilistic network. Breakdown Structure

BRACING CHIN LOG: _ _ _ _ _ _ _ _ _ | _ _ _ _ _

Last Week's Anagram.

A record of jobs to do or to check that others have done, commitments from the author or others, important events, decisions and discussion, and kept by the project manager and any team members.

ALLOY DIG: DAILY LOG

Wideman Glossary Term of the Week - Graph

• In Quality Management, a visual comparison of variables that yield data in numerical facts. Examples include trend graphs, histograms, control charts, frequency distributions arid, scatter diagrams.

• In Time Management, the display or drawing that shows the relationship between activities. Pictorial representation of relative variables.

Labels: avoid the risk, manage the risk, mitigate the risk, monitor the risk, move the risk