Concepts

Each strategy comes under the purview of the PMI Risk Management Professional (PMI-RMP), showcasing its importance in exam preparation.

For practitioners in the field of project management, the application of risk response strategies becomes easier with a thorough understanding of the quintessential strategies often used in various professional scenarios.

For the sake of clarity and ease of understanding, we will discuss four basic risk response strategies, relating them to instances in project management, particularly for those studying for the PMI-RMP exam.

Avoidance

This strategy is implemented when the idea is to completely circumvent the risk from the project. This is done by changing project plans or aspects relevant to the risk. For example, if an IT project involves the use of a newly released Software X with unknown cybersecurity vulnerabilities, the project manager may decide to avoid the risk by opting for a safer alternative with known performance and safety records.

Mitigation

Mitigation aims to reduce the negative impact of risks by lowering their probability or impact. This strategy is often employed when avoiding the risk is not possible. For instance, a construction project’s risk of schedule delays due to weather could be mitigated by procuring equipment that could operate under adverse weather conditions, thus reducing the risk’s impact on the project timeline.

Transfer

This strategy passes the risk to a third party, usually by outsourcing the risky task or using insurance. An example for such a strategy might be found in a project that involves building infrastructure in a location with a high risk of earthquakes. To transfer the risk, the project manager could opt for an insurance policy that specifically covers damages caused by such natural disasters.

Acceptance

As the name suggests, this strategy involves acknowledging the existence of the risk and being prepared to accept the consequences if it matures. This is often chosen when other strategies are not cost-effective or possible. For example, in a software development project, there could be impending risks linked to technology updates that could render the project obsolete. In such cases, the team might accept the risk and decide to adapt to the update, if and when it rolls out.

It is crucial to note that these strategies do not function in isolation and often a combination of these strategies is used according to the circumstances the project finds itself in.

Strategy When to Use
Avoidance When the risk can be completely eliminated from the project through changes in project planning
Mitigation When there is a need to reduce the probability or impact of the risk without avoiding it
Transfer When passing the risk to a third party is economically or operationally viable
Acceptance When it is more viable to deal with the consequences of the risk rather than investing to avoid or transfer it

In conclusion, understanding and appropriately applying these risk response strategies is fundamental for effective risk management, and furthermore, it is a key aspect of the PMI-RMP exam as well.

Effective risk management, in turn, contributes significantly to the success of projects—ensuring that they are delivered on time, within budget, and according to scope.

Answer the Questions in Comment Section

True or False: A risk response strategy can be categorized as avoidance, mitigation, transfer, or acceptance.

  • True
  • False

Answer: True

Explanation: These are the classifications of risk response strategies. Each of them is used in different contexts based on the type of risk and the project at hand.

Multiple Select: Which of the following are traditional risk response strategies according to PMI?

  • A. Withdrawal
  • B. Acceptance
  • C. Balancing
  • D. Transfer

Answer: B, D

Explanation: The traditional risk response strategies according to the Project Management Institute (PMI) are avoidance, mitigation, transfer and acceptance.

Single Select: Which risk response strategy involves changing the plan to eliminate the risk or to protect the project objectives from its impact?

  • A. Mitigation
  • B. Avoidance
  • C. Transfer
  • D. Exploit

Answer: B, Avoidance

Explanation: Avoidance risk response strategy involves changing aspects of the project to eliminate the risk or protect the project objectives from its impact.

True or False: The use of insurance is an example of risk acceptance.

  • True
  • False

Answer: False

Explanation: Risk acceptance means that the organization takes the chance that the risk will occur, with no action. Using insurance is an example of risk transfer, as the financial risk is transferred to the insurer.

Multiple Select: What are the key components of an effective risk response strategy?

  • A. Defining the risk
  • B. Communicating the risk
  • C. Assigning the risk owner
  • D. Ignoring the risk

Answer: A, B, C

Explanation: Defining the risk, communicating it, and assigning the risk owner are all key parts of an effective strategy. Ignoring the risk is not advisable in a risk management strategy.

Single Select: In order to effectively communicate the effectiveness of a risk response strategy, you should:

  • A. Keep the information to yourself
  • B. Only tell the project manager
  • C. Communicate the strategy to all stakeholders
  • D. Only inform the client

Answer: C, Communicate the strategy to all stakeholders

Explanation: The effectiveness of a risk response strategy is best communicated when all stakeholders are informed. It promotes transparency and better collaboration.

True or False: Identifying risks early in your project improves their potential impact.

  • True
  • False

Answer: True

Explanation: Identifying risks early allows more time for planning and implementing risk response strategies, hence improving their potential positive impact or reducing the negative effects.

Multiple Select: Which of the following should be considered when evaluating the effectiveness of a risk response strategy?

  • A. Impact on the project deadline
  • B. Cost of the project
  • C. The project’s quality
  • D. The personal opinion of the project manager

Answer: A, B, C

Explanation: Deadlines, costs, and quality are concrete measures by which the effectiveness of a risk response strategy can be gauged, while a personal opinion is subjective and potentially biased.

Single Select: The classification of risk that aims to reduce the probability or impact of a risk to within acceptable thresholds is:

  • A. Transfer
  • B. Mitigation
  • C. Acceptance
  • D. Avoidance

Answer: B, Mitigation

Explanation: Mitigation is the categorization of risk that’s aimed at reducing the probability and or the impact of an adverse risk event to be within acceptable threshold limits.

True or False: The “enhance” risk response strategy is used for positive risks or opportunities.

  • True
  • False

Answer: True

Explanation: “Enhance” is a strategy used to increase the probability and/or the positive impacts of an opportunity. It’s a part of overall positive risk strategies which include exploit, share, and enhance.

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Lilou Lemoine
7 months ago

Great article! Can someone explain how the avoidance strategy works in the context of PMI-RMP?

Óliver Noriega
9 months ago

Appreciate the blog post! Very informative.

Luisa Da Silva
7 months ago

Is there a difference between mitigation and transference strategy?

Namitha Kaur
8 months ago

Thanks for the insights!

Aatu Marttila
8 months ago

Can someone elaborate on how to effectively implement the escalation strategy?

Julie Hansen
8 months ago

The examples provided really clarify different risk response strategies. Thanks!

Nolhan Lopez
8 months ago

Just wanted to point out that some risks can’t be completely avoided. Thoughts?

Muammer Pullen
8 months ago

What documentation is necessary when transferring a risk?

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