PMI Risk Management Professional (PMI-RMP)

Execute the contingency plan(s)

Concepts

When it comes to project management, risk is inevitable, and hence it becomes critical to understand how to manage it effectively. The PMI Risk Management Professional (PMI-RMP) exam equips project management professionals with structured risk management methodologies. One of these methodologies is the execution of contingency plans, an imperative aspect of successful project risk management.

A. Understanding Contingency Plans

Contingency planning, often referred to as ‘Plan B,’ involves outlining steps that an organization will take when an identified risk impacts business operations, objectives, or projects. Contingency plans serve as structured responses to potential events or situations. The effectiveness of these plans lies in their capacity to minimize the risk impact and help the project return to its normal course as quickly as possible.

A contingency plan generally contains the following components:

Risk Identification: Define and describe the risk.
Risk Impact Assessment: Underline the potential implications and consequences.
Risk Prioritization: Classify risk as per impact and likelihood.
Contingency Action: Define specific actions to be taken when the risk event occurs.
Assigned Responsibility: Designate responsibility for implementing the contingency action.

The goal is not to predict every possible risk but rather to develop a practical, adaptable plan that can be applied when needed.

B. Executing Contingency Plans

The execution of contingency plans comprises a set of logical steps:

Risk Confirmation: Confirm that the identified risk has actually occurred.
Evaluate Impact: Assess the initial impact of the risk event on the project.
Activate Contingency Plan: Trigger the steps outlined in the contingency plan.
Implement Actions: Carry out actions defined in the plan promptly and efficiently.
Review: Post-action review of the process, determine the effectiveness, and make necessary adjustments for the future.

C. Contingency Plan in Practice – An Example

Let’s consider a project to implement a new software system, and one of the identified risks is a potential delay in the software delivery.

Risk Identification: Delay in software delivery
Risk Impact Assessment: Project timeline and budget could be affected.
Risk Prioritization: High (given the criticality of the software to project success)
Contingency Action: If the delivery is delayed, the project team will begin working on other segments of the project not dependent on the system, or use an alternate system for temporary set up.
Assigned Responsibility: The Project Manager will oversee the execution of the contingency plan.

If the software delivery is indeed delayed, the Project Manager would set the contingency plan into action—re-tasking the team to other areas or setting up an alternate temporary system.

In conclusion, the PMI-RMP exam places considerable emphasis on creating and executing contingency plans, as these techniques are a fundamental aspect of managing risk in projects. By learning to execute contingency plans effectively, project managers can ensure that they are prepared for surprises and can manage their projects successfully even in the face of uncertainty.

Answer the Questions in Comment Section

True/False: The purpose of a contingency plan in risk management is to put into action if a risk event occurs.

True
False

Answer: True

Explanation: Contingency plans are pre-determined strategies or actions to take if a certain risk event occurs, to mitigate its effects.

Which of the following is NOT one of the main components to an effective contingency plan?

A. Risk Assessment
B. Development of Contingency Strategies
C. Industry Standards
D. Resource Requirements

Answer: C. Industry Standards

Explanation: While industry standards can inform contingency planning, they are not a main component. The contingency plan is mainly composed of a risk assessment, contingency strategies, and resource requirements.

True/False: The contingency plan should be developed after the risk has occurred.

True
False

Answer: False

Explanation: Contingency plans are developed in the risk management planning stage to be ready if a risk event occurs.

Multiple select: Which of the following are steps to executing a contingency plan?

A. Creating a Buffer
B. Verifying the Risk Event
C. Allocating Resources
D. Waiting for Next Risk

Answer: B. Verifying the Risk Event, C. Allocating Resources

Explanation: When executing a contingency plan, it involves verifying that the risk event has occurred, and then appropriately allocating resources to execute the plan.

Single select: Who should take the responsibility for executing the contingency plan?

A. Risk owner
B. Project manager
C. Stakeholders
D. Sub-contractors

Answer: A. Risk owner

Explanation: The risk owner, the person assigned to manage the response to a risk, takes responsibility for executing the contingency plan.

True/False: Contingency reserves are funds to be used when the contingency plan is executed.

True
False

Answer: True

Explanation: Contingency reserves are monetary resources set aside to cover unanticipated cost overruns or scheduling changes caused by identified risks.

Single select: When should the contingency plan be modified?

A. After every risk
B. When the risk landscape has changed
C. Every month
D. Never

Answer: B. When the risk landscape has changed

Explanation: The contingency plan is reviewed and modified when the risk landscape has changed, otherwise it remains active throughout the project lifecycle.

True/False: The risk response team should also be responsible for executing the contingency plan.

True
False

Answer: True

Explanation: The risk response team, led by the risk owner, is responsible for the execution of the contingency plan.

Single select: What is the next step once a contingency plan has been executed?

A. Pause the project
B. Review the situation and the effectiveness of the plan
C. Inform all stakeholders
D. Evaluate the plan cost

Answer: B. Review the situation and the effectiveness of the plan

Explanation: Once a contingency plan has been executed, it’s important to review the situation and evaluate how well the plan worked, in order to make improvements for the future.

Is uncertainty a component of the contingency plan?

A. Yes
B. No

Answer: A. Yes

Explanation: Contingency planning depends on the level of uncertainty related to the likelihood of risk occurrence. It’s about planning for scenarios that is uncertain but likely.

True/False: Contingency plan is also referred to as ‘Plan B’.

True
False

Answer: True

Explanation: A contingency plan often serves as a “Plan B” in risk management, providing an alternative action plan when the original plan becomes untenable.

Single select: What is the primary purpose of a contingency plan?

A. To identify risks
B. To respond to unexpected events
C. To ignore risks
D. To prevent risks from happening

Answer: B. To respond to unexpected events

Explanation: The primary purpose of a contingency plan is to provide clear and concise instructions for how to respond when certain unexpected events occur.