Plan Risk Response

Risk Response Methods

Businesses are always associated with some risk elements. Managing risks affects their profitability and may be a determining factor for companies to thrive in competitive markets. Risk response includes establishing risk policies, standards, and goals for managing risks. Listed are examples of activities associated with response strategies:

• Sharing risk inputs and outputs with other project plans
  
• Identifying prevention activities
  
• Exercising prevention activities
  
• Documenting updates to plans
  
• Reviewing response plans with risk owners and other stakeholders
  
• Executing the risk management plan

Risk responses should be appropriate for the complexity and cost of the responses concerning the project. The following strategy types may be applied for planning, managing, and controlling risks.:

Response Planning:

• Mitigation. Minimize risks by removing the cause.

Example: If your vendor is habitually late delivering critical parts, you can assign internal staff to pick up the parts directly.

• Share. Share responsibility and benefit of the risk with another party, typically in cases of opportunities.

Example: If another group/entity benefits from your product, both groups can share marketing efforts and costs.

• Contingency Planning. Planning that is used only if certain conditions or circumstances are presented in the future or for worst-case scenarios

Example: Fast-track the project if the critical path schedule slips.

Risk Handling:

• Avoidance. The avoidance mechanism is considered the first option for dealing with risks in risk management. Modify the plan to avoid the risk by isolating the project’s objective from the impact. This tactic is usually accomplished through replanning and or renegotiations.

For example, if your primary electrician typically takes his annual vacation approximately around the time his services are planned, assign the activity to a different electrician and use him as a potential backup.

• Control/Acceptance. Sometimes the project manager may need to accept the level of risk compared to risk avoidance citing the higher cost or effort of risk avoidance. Frequently, managers prefer to retain risk with zero hesitation.

Example: If you are hosting a huge gala and have large amounts of cash on-site, which has a risk of theft. You decide to accept and control the risk by securing the cash in a moderately priced safe and limiting access.

• Transfer (deflect). Transferring risks is considered the last risk managing step in risk management. This response transfers the responsibility of addressing the risk to another party, which in itself is an additional risk. This tactic is a form of acceptance. The difference is the reduced financial impact in the event the risk occurs.

Example: Purchase insurance for protection against your risk or hire a contractor for the specific scope of work.

Unlike workarounds for unanticipated risk events, contingency responses are developed in advance. Workarounds may also result from an ineffective risk response.

During your project meetings, as embarrassing as it may feel to discuss your failed attempts to manage the project, it is helpful to discuss any lessons learned from any implemented risk responses. Communicate about the project’s risk often. Explain in detail the nature of the risk, how it will impact the project and what you plan to do to minimize the problem.

Be sure to close out null risks to allow the team to focus on monitoring and managing any remaining risks. Update all applicable registers, lists, reserves, and plans.

Summary

Risk planning, identification, and analysis are only useful if used and appropriately distributed and utilized amongst risk owners and other team members and included in the project plan. Like a curved road, we can’t fully see our final destination and can’t anticipate everything that will happen in the project. Some risks aren’t identifiable until you are further along in the project.

Closely examine how the risk impact the project’s triple constraint (scope, schedule, and budget). Ask yourself if you have allotted enough wiggle room or flexibility in your schedule and have adequate reserves in the budget to accommodate a few unknowns. Have you empowered your risk owners with the proper authority and tools to carry out their duties successfully? Did you create a watch list with descriptions of triggers or early warning signs to give your risk owners and you a heads up? Remember, the effectiveness of managing risks is directly related to the project’s success.

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