This document discusses risk response strategies for threats and opportunities on projects. It identifies strategies such as avoid, transfer, mitigate, and accept for threats, and exploit, share, enhance, and accept for opportunities. Specific examples are given of risks from a project and the corresponding risk responses. The key risk response process involves determining appropriate strategies, developing options, evaluating options, selecting responses, and assigning owners to implement and monitor the responses.
This document discusses risk response strategies for threats and opportunities on projects. It identifies strategies such as avoid, transfer, mitigate, and accept for threats, and exploit, share, enhance, and accept for opportunities. Specific examples are given of risks from a project and the corresponding risk responses. The key risk response process involves determining appropriate strategies, developing options, evaluating options, selecting responses, and assigning owners to implement and monitor the responses.
This document discusses risk response strategies for threats and opportunities on projects. It identifies strategies such as avoid, transfer, mitigate, and accept for threats, and exploit, share, enhance, and accept for opportunities. Specific examples are given of risks from a project and the corresponding risk responses. The key risk response process involves determining appropriate strategies, developing options, evaluating options, selecting responses, and assigning owners to implement and monitor the responses.
This document discusses risk response strategies for threats and opportunities on projects. It identifies strategies such as avoid, transfer, mitigate, and accept for threats, and exploit, share, enhance, and accept for opportunities. Specific examples are given of risks from a project and the corresponding risk responses. The key risk response process involves determining appropriate strategies, developing options, evaluating options, selecting responses, and assigning owners to implement and monitor the responses.
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Risk Response
Risk response is the process of developing strategic options, and determining
actions, to enhance opportunities and reduce threats to the project’s g objectives. A project team member is assigned to take responsibility for each Mo & nitoCon rin trol risk response. This process ensures that each risk requiring a response has an owner monitoring the responses, although the owner may delegate implementation of a response to someone else.
Risk Response Strategies
For Threats For Opportunities
Avoid. Risk can be avoided by removing the Exploit. The aim is to ensure that the opportunity cause of the risk or executing the project in a is realized. This strategy seeks to eliminate the different way while still aiming to achieve uncertainty associated with a particular upside project objectives. Not all risks can be avoided risk by making the opportunity definitely happen. or eliminated, and for others, this approach may Exploit is an aggressive response strategy, best be too expensive or time‐consuming. However, reserved for those “golden opportunities” having this should be the first strategy considered. high probability and impacts.
Transfer. Transferring risk involves finding Share. Allocate risk ownership of an opportunity another party who is willing to take to another party who is best able to maximize its responsibility for its management, and who will probability of occurrence and increase the bear the liability of the risk should it occur. The potential benefits if it does occur. Transferring aim is to ensure that the risk is owned and threats and sharing opportunities are similar in managed by the party best able to deal with it that a third party is used. Those to whom threats effectively. Risk transfer usually involves are transferred take on the liability and those to payment of a premium, and the whom opportunities are allocated should be cost‐effectiveness of this must be considered allowed to share in the potential benefits. when deciding whether to adopt a transfer strategy.
Mitigate. Risk mitigation reduces the Enhance. This response aims to modify the “size” probability and/or impact of an adverse risk of the positive risk. The opportunity is enhanced event to an acceptable threshold. Taking early by increasing its probability and/or impact, action to reduce the probability and/or impact thereby maximizing benefits realized for the of a risk is often more effective than trying to project. If the probability can be increased to 100 repair the percent, this is effectively an exploit response. damage after the risk has occurred. Risk mitigation may require resources or time and thus presents a tradeoff between doing nothing versus the cost of mitigating the risk.
Acceptance. This strategy is adopted when it is not possible or practical to respond to the risk by the other strategies, or a response is not warranted by the importance of the risk. When the project manager and the project team decide to accept a risk, they are agreeing to address the risk if and when it occurs. A contingency plan, workaround plan and/or contingency reserve may be developed for that eventuality. Examples of Risk Responses
Table 6 repeats the example risk statements from Table 4 and shows a risk response for each.
TABLE 6 –EXAMPLE RISK RESPONSES
Risk Statement Risk Response Inaccuracies or incomplete information in the Mitigate: Work with Surveys to survey file could lead to rework of the design. verify that the survey file is accurate and complete. Perform additional surveys as needed. A design change that is outside of the Design parameters contemplated in the Environmental Avoid: Monitor design changes Document triggers a supplemental EIS1 which against ED to avoid reassessment causes a delay due to the public comment of ED unless the opportunity period. outweighs the threat. Potential lawsuits may challenge the Mitigate: Address concerns of environmental report, delaying the start of stakeholders and public during construction or threatening loss of funding. environmental process. Schedule additional public outreach.
Environmental Mitigate: Schedule contract work
Nesting birds, protected from harassment under to avoid the nesting season or the Migratory Bird Treaty Act, may delay remove nesting habitat before construction during the nesting season. starting work. Due to the complex nature of the staging, additional right of way or construction easements may be required to complete the Mitigate: Re‐sequence the work work as contemplated, resulting in additional to enable ROW Certification. cost to the project. Due to the large number of parcels and R/W businesses, the condemnation process may have Mitigate: Work with Right‐of‐ to be used to acquire R/W, which could delay Way and Project Management to start of construction by up to one year, prioritize work and secure increasing construction costs and extending the additional right‐of‐way resources time for COS. to reduce impact. Hazardous materials encountered during construction will require an on‐site storage area Accept: Ensure storage space will and potential additional costs to dispose. be available.
Construction Unanticipated buried man‐made objects
uncovered during construction require removal Accept: Include a Supplemental and disposal resulting in additional costs. Work item to cover this risk.
1 Responding to Risks
Following identification and analysis of project risks, the PRMT takes action to improve the odds in favor of project success. Ultimately, it is not possible to eliminate all threats or take advantage of all opportunities – but they will be documented to provide awareness that they exist and have been identified. Successful risk response will change the risk profile through the project life cycle, and risk exposure will diminish. Risk response involves: The PRMT determining which risks warrant a response and identifying which strategy is best for each risk. Assigning an action to the Risk Owner to identify options for reducing the probability or impacts of each risk. The Risk Owner takes the lead and can involve experts available to the project. Evaluating each option for potential reduction in the risk and cost of implementing the option. Selecting the best option for the project. Requesting additional contingency, if needed. Assigning an action to the Risk Owner to execute the selected response action. The Risk Owner is the lead and may assign specific tasks to other resources to have the response implemented and documented. If the PRMT judges that a risk should be accepted, it may assign an action to the Risk Owner to prepare a contingency plan if deemed necessary.
A RISK PERSPECTIVE CAN ENHANCE DECISIONS
When considering risk mitigation methodology, it is important to recognize the impacts of the decision. The impact of responding to a risk may make sense in the short term (e.g. Saves design costs, allows team to meet schedule), but the impact of the risk needs to be taken as a whole. For example, the impact of just a few unknown conditions can affect the construction schedule to the point where an environmental work window requires the project to be suspended. It is important to recognize how much of an impact there would be in making a decision. While the direct cost of resolving the unknown condition may be less than the cost of a site visit, the overall impact of the change may be a significant delay to the contract if not recognized.
Entering Risk Responses into the Risk Register
The risk response action for each risk is entered into the “Response Actions” column of the risk register. Risk responses are options and actions that enhance opportunities or reduce threats. The PMRT, PRM, PM or project team decide upon the response action to risks listed in the risk register. The response action is then assigned to one person, the person responsible for executing and monitoring the risk response that is chosen. Planned risk responses must be appropriate to the significance of the risk, cost effective in meeting the challenge, realistic within the project context and agreed upon by all parties involved, and owned by a single person. Risk responses must also be timely.2
2 Project Management Institute. A Guide to the Project Management Body of Knowledge (PMBOK Guide) – Fourth Edition
3.2 Techniques of Maximizing Total Revenue 3.3 Techniques of Maximizing Output: Minimizing The Average Cost 3.4 Maximization of Profit 3.5 Constrained Optimization
