Program Semester Subject Code Subject Name Unit number
: MBA : IV : PM0016 : Project Risk Management :6
Unit Title
Lecture Number Lecture Title
: Risk Handling Strategies
:6 : Risk Handling Strategies
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Unit-6 Risk Handling Strategies
Risk Handling Strategies
Objectives :
The objectives of this lecture are to: Introduce Risk Handling Strategies. Explain the objectives of risk handling. Devise risk tracking and risk process implementation. Compare risk acceptance and risk transfer. Assess the importance of contingency reserves.
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Unit-6 Risk Handling Strategies
Lecture Outline
Introduction Risk Handling Strategies Risk Handling Strategies Objectives
Elements of Risk Handling Strategies
Risk Tracking Risk Acceptance Risk Mitigation Risk Transfer Risk Avoidance Contingency Reserves Risk Process Implementation Risk Documentation Summary Check Your Learning Activity
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Unit-6 Risk Handling Strategies
Introduction
Risk handling is the process of risk identification, analysis, and response.
Risk handling process includes the following:
Identification, assessment and the prioritisation of various risks. Minimising, monitoring, and taking control of the probability
and impact of risks by coordinated application of all the
resources. This unit familiarises you with various risk handling strategies.
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Unit-6 Risk Handling Strategies
Risk Handling Strategies
The risks handling strategies are:
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Unit-6 Risk Handling Strategies
Risk Handling Strategies Objectives
Risk handling is a critical aspect in achieving basic and overall objectives of the project. Risk handling strategies achieve the following objectives: Perform risk assessments. Establish risk handling priorities. Develop risk handling plans. Monitor the status of risk handling actions. Implement appropriate risk management strategies. Raise awareness of risk management.
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Unit-6 Risk Handling Strategies
Elements of Risk Handling Strategies
The key elements of risk handling include the following:
Risk policies and governance at board level
Risk function
Identify
Monitor
Assess
Control
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Unit-6 Risk Handling Strategies
Risk Tracking
Risk tracking assures that established controls are functioning properly and thus supports proactive system management. It depends on efficiently breaking the process of risk monitoring into small bits of information. It can range from basic monitoring knowledge to risk monitoring job supporters such as templates and examples.
The key to monitoring process includes:
Establishing Cost Establishing Schedule Establishing Performance management indicator system
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Unit-6 Risk Handling Strategies
Risk Acceptance
Risk acceptance is an informed decision taken to accept the consequences
and likelihood of a particular risk. An organisation should manage its risks to balance the opportunities
against the potential losses for the overall improvement of the business.
The quantity of risk that an organisation is able to take is often called as its 'risk appetite' or 'risk tolerance. Every organisation can accept a level of risk, If risk mitigation costs are higher than the probable losses. If risks require mitigation but it is not possible.
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Unit-6 Risk Handling Strategies
Risk Mitigation
Risk mitigation refers to the systematic reduction in the likelihood of risk occurrence. It is also called as risk reduction. Risk mitigation includes the following actions: Prioritising actions Evaluating recommended control options Conducting cost-benefit analysis Selecting control Assigning responsibility
Developing a safeguard implementation plan
Implementing selected control(s)
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Unit-6 Risk Handling Strategies
Risk Transfer
Risk transfer is the shifting of responsibility or burden for disaster or loss, to another party through legislation, contract, insurance or other means. A good risk response plan identifies the third party to whom certain risks can be transferred. It always make the best case scenario less good, the worst case scenario less bad. It displaces the expected monetary value towards lower benefit.
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Unit-6 Risk Handling Strategies
Risk Avoidance
Risk Avoidance refers to reducing risk to the organisation through better management information. Risk Avoidance is a business strategy.
Risk Avoidance is a technique of risk management that involves: Taking steps against a hazard. Engaging in alternative activity, or otherwise end a specific exposure.
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Unit-6 Risk Handling Strategies
Contingency Reserves
Contingency reserves refers to the funds or other financial resources that is required to reduce the risk of overruns. It is used to deal with unknown risks and accepted known risks. It covers risk events that are not accounted for in the project baseline duration and cost estimations.
The considerations for contingency plan are : Actions Scope Initiation Roles and responsibilities
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Unit-6 Risk Handling Strategies
Risk Process Implementation
Risk process implementation is about what ongoing actions should be taken beyond planning. It focuses on the performance of overall process and its integration with the other metrics programs. Risk process implementation requires: Clear objectives Proper planning and resourcing Effective monitoring and control Clear success criteria
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Unit-6 Risk Handling Strategies
Risk Documentation
Risk Documentation is an important aspect of risk management. It has to be done for the entire risk management process. It includes data from: Planning Assessment Handling Monitoring activities
Documentation of risk management activities include creating: Risk management plan Risk information form(s) Risk assessment report Risk handling priority list Risk handling plan of action
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Unit-6 Risk Handling Strategies
Summary
Risk handling means risk treatment. The five Risk handling strategies were discussed.
Risk documentation helps to provide guidance to solve any future
problems or risks. Contingency reserve helps to find out any possible impact of risk that involves making a contingency plan to reduce the impact.
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Unit-6 Risk Handling Strategies
Check Your Learning
1. Define Risk Transfer.
Ans. Risk transfer can be defined as shifting the responsibility or burden
for disaster or loss to another party through legislation, contract,
insurance or other means.
2. What is Contingency Reserves?
Ans. Contingency reserves refers to the funds or other financial resources that is required to reduce the risk of overruns.
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Unit-6 Risk Handling Strategies
Activity
Consider that you are a project manager for one of the long term
project. In your project if the team members are taking more leaves
which causes and might cause huge delays in the project delivery timelines, how would you address the issue of risk appetite here and what would be the risk mitigation steps that you might take?
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