You and I encounter risks every day. Sometimes we actively respond; other times we passively accept the risk. Our decisions have consequences, moving us closer to success or creating greater uncertainty.
Consider the following personal risks and responses:
- You feel a headache coming on. You take an aspirin.
- Your teenager has another fender bender. You take away the car.
- You hear about a stock that is performing well. You purchase the stock.
- Your auto mechanic says that the tread on your tires is thin. We do nothing (at least for now).
- Your credit card debt is getting out of control. You cut up the credit cards.
- You add on a garage to your house. You add insurance coverage.
- Your dentist tells you that you are starting to have gum problems. You start flossing regularly.
- There’s something in the road. You swerve to miss it.
- We see an ad to buy one pizza and get a second one free. We order the pizza.
Seven Ways to Respond to Your Greatest Risks
We can respond to risks — including threats and opportunities — in one of seven ways. What strategies were being employed in the examples above?
|Negative Risk Strategies (Threats)||Positive Risk Strategies (Opportunities)|
|Avoid – Eliminate the threat normally by removing the cause of the threat altogether (e.g., remove activities).||Exploit – Ensure that opportunity is realized (e.g., purchase a higher quantity of materials in order to get additional price discount).|
|Transfer – Shift the impact of the threat to a third party (e.g., insurance, agreements).||Share – Assign all or part of the opportunity to a third party (e.g., team agreement between internal and external parties).|
|Mitigate – Reduce the probability or impact of a threat (e.g., requirements review, testing).||Enhance – Increase the probability or impact of an opportunity (e.g., add more resources to a task).|
|Accept – Acknowledge the risk but take no action unless the risk occurs.|
Our goal is to increase the likelihood and impact of the positive events and decrease the likelihood and impact of the negative events.
In our personal lives, we often make decisions intuitively, without much thought. As long as life is simple, this approach may serve us well.
However, this informal approach often fails when managing programs or even several small projects. We can’t keep it all in our head. We need a solid approach to identifying, evaluating, and responding to risks that yields in a well-maintained risk register.
Review your project risk registers. Hopefully, you’ve rated your risks and you now have a prioritized list of risks — you know which risks are greatest. Now determine your risk response strategies for the highest risks. In the following weeks, we will look at ways to respond to your risks including contingency plans, fallback plans, and selecting risk owners.