Imagine you have a large amount of credit card debt. You decide to eliminate one of the causes of your debt. So, you cut up your credit cards.
What if you had an opportunity to increase company revenue by getting a product to market a few months early? You could assign your most skilled resources to your critical path tasks.
In our projects, we face threats that may limit our ability to achieve our goals. We also see opportunities, if properly seized, that could allow us to make greater progress. Our job is to treat risks to enhance opportunities and reduce threats. We can optimize our risk responses over time.
Project Risk Strategies
How Can We Treat Risks?
The PMBOK defines risk as “an uncertain event or condition that, if it occurs, has a positive or negative effect on one or more project objectives such as scope, schedule, cost, and quality.” Therefore, project managers should plan for both threats and opportunities. Here are eight strategies that we may employ.
|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 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.|
|Escalate – Escalate risks outside the scope of the project or that the proposed response exceeds the project manager’s authority. These risks are escalated to individuals within the organization who will manage the risks.|
Notice how the risk strategies for threats and opportunities are often opposites. For example, in mitigating a threat, we reduce the probability or impact of the threat. As we enhance an opportunity, we increase the probability or impact of the opportunity.
Other Risk Response Tips
- The level of detail for the risk response plans should be commensurate with the significance of the risks. Project managers may choose to develop risk responses plans for their greatest risks only.
- Validate risk owners that were assigned during the risk identification process. If a risk owner has not been assigned, assign the owner before developing the risk responses.
- Create contingency and fallback plans for residual risks (i.e., risk remaining after the risk response planning) where appropriate.
- If you choose to accept the risk, determine whether you will passively accept the risk (i.e. no contingency plans are defined) or actively accept the risk (i.e. contingency plan are defined).