PM Center Insider
By Fahad Usmani, PMP®, PMI-RMP®, contributing blogger
Fahad Usmani, PMP®, PMI-RMP®, is founder of PMstudycircle.com and the author of A2Z of PMP Certification Exam. He has over 10 years of global portfolio management experience, specializing in leading complex corporate projects. He currently serves as an Inspection Engineer in Kuwait and facilitates project management training programs throughout the Middle-East.
As we know, risks are not always bad; sometimes they can bring some opportunities as well. Negative risks or threats have a negative impact on the project objective and positive risks have a positive impact on the project objective.
Therefore, risk response strategies to manage positive and negative risks are different.
In the PMBOK Guide, we have following strategies to manage negative risks:
The following strategies are used to manage positive risks:
In this blog post we are going to discuss the negative risk response strategies in detail. For the positive risk response strategies, refer to my next blog post.
Okay let’s get started.
In this type of risk response strategy, you try to minimize either the probability of the risks happening or the impact.
For example, you find that a team member from your team may leave for a certain duration during the peak of your project. Therefore, to minimize the impact of his absence, you identify another employee with similar qualifications from your organization and inform his boss that you may need him for your project for a period of time.
In transfer risk response strategy, you transfer the risk to a third party to manage it. Please note that the transfer of risk does not eliminate the risk; it only transfers the responsibility of managing the risk to the third party.
For example, in your project there is a task to install some equipment and you don’t have much experience in this type of task. Therefore you ask a contractor to come and install it and sign a fixed-price contract.
In this way you have transferred the responsibility of the whole task to a third party, and now it is his responsibility to complete the task within the agreed time and cost.
Here you try to eliminate the risk or its impact on your project objective. You do this by either changing your project management plan, by making some changes to the project scope, or by changing the schedule.
For example, you observe that during certain periods of your project there is a chance of rain and you have some work planned outdoors at that time. Therefore, to avoid this risk, you move these activities to some other time to avoid the effect of rain.
This risk response strategy can be used with both kinds of risks, i.e. either positive risks or negative risks.
Here, you don’t take any action to manage the risk but you do acknowledge it.
You can accept the risk either by actively acknowledging it or passively acknowledging it.
In active acceptance you keep a separate contingency reserve to manage the risk if it occurs, and in passive acceptance you do nothing except note down the risk.
You have four risk response strategies to deal with negative risks. You will select the strategy to manage the risk depending on the type of risk. If you see that you can manage the risk, you will go for the mitigation risk response strategy. If you see that a third party is better equipped to manage the risk than you, you will go for the transfer risk response strategy. If you find it difficult to manage the risk in any way, you will avoid it. And in the accept risk response strategy, you just acknowledge the risk and note it down and decided to manage it only if it happens.