Concepts
These strategies are especially fundamental for those intending to pass the Project Management Institute Risk Management Professional (PMI-RMP) exam, as implementing risk response is a key aspect of the PMI-RMP examination and practice.
Defining Risk Response
Risk response is the process of identifying, assessing and controlling threats to a project’s capital and earnings. The responses vary depending on the nature of the identified risks and their potential impact on a project.
Simply put, risk response is how you plan to handle potential issues. The PMI-RMP exam places a significant emphasis on understanding risk response as it’s a crucial part of risk management.
Risk Response Strategies
Here, we’ll focus on the four major risk response strategies defined by the Project Management Institute (PMI): Avoid, Transfer, Mitigate, and Accept.
1. Avoid:
This strategy seeks to remove the risk entirely either by eliminating the cause of the risk or by changing project plans in a way that eliminates the risk. This is by far the most effective risk response strategy, but it’s also often the hardest to implement as it may require a significant change in project plans.
2. Transfer:
Risk transfer is a risk management and control strategy that involves the contractual shifting of a pure risk from one party to another. It’s a way of making a third party responsible for the risk.
3. Mitigate:
Mitigation reduces the probability or impact of an adverse risk event to be within acceptable threshold limits. It involves planning steps to reduce the impact if the risk does occur.
4. Accept:
Risk acceptance is the risk response strategy where the project team decides to acknowledge the risk and not take any action unless the risk occurs. It’s usually a strategy chosen when the other responses are not suitable or when the risk impact is relatively low.
Below is a comparison table of the Risk response strategies:
| Strategy | Approach | Best Suited for |
|---|---|---|
| Avoid | Eliminate the risk or its cause | High-impact risks |
| Transfer | Shift the responsibility of the risk to a third-party | Risks previously transferred in other projects with success |
| Mitigate | Reduce the impact of the risk | Risks too expensive or impracticable to avoid |
| Accept | Acknowledge the risk and not take any action yet | Lower level risks |
Creating a Risk Response Plan
Having in place a concrete Risk Response Plan is key to effective risk management. The following steps are a practical guide for creating effective Risk Response Plans:
- Identify Risks: Initial risk identification can come from a variety of sources such as historical data, project documents, expert judgment, etc.
- Analyze Risks: Once the risks have been identified, it is imperative to analyze them based on their potential impact and likelihood of happening.
- Develop Risk Response Strategies: Leveraging the risk response strategies outlined above, create specific plans for the most impactful risks by determining the steps that need to be taken if the risk event occurs.
- Assign Risk Owners: The key stakeholders or the team members who are best equipped to handle the risk are assigned as risk owners and are made responsible to execute the risk response plan if required.
- Monitor & Control Risks: Track identified risks, monitor residual risks, and execute the risk response plans if necessary while endeavouring to identify new risks.
In conclusion, the PMI-RMP exam focuses on providing you with practical skills and knowledge that can help you to effectively handle project risks. The correct and well-planned implementation of risk response is one key skill you will definitely need, starting from the project planning stage right through to the project executing and closing stages.
Answer the Questions in Comment Section
True/False: Implement risk response is the process of planning and executing actions to mitigate potential adverse effects of risks.
- True
- False
Answer: True
Explanation: Implement risk response involves carrying out risk response plans, tracking identified risks, and evaluating the effectiveness of risk responses, in order to ensure risk mitigation.
Which of the following is an important part of risk response?
- A) Identifying risks
- B) Prioritizing risks
- C) Implementing risk
- D) All of the above
Answer: D) All of the above
Explanation: Risk response involves all three, as identifying and prioritizing risks are necessary before implementing an appropriate response.
True/False: A risk may warrant more than one response strategy.
- True
- False
Answer: True
Explanation: Depending on the risk, more than one response strategy may be needed or appropriate to effectively mitigate its potential impact.
Single Select: Which of the following is NOT considered a risk response strategy?
- A) Avoid
- B) Engage
- C) Transfer
- D) Accept
Answer: B) Engage
Explanation: The four possible risk response strategies in project management are avoid, accept, transfer, and mitigate.
True/False: The effectiveness of risk responses should be periodically reviewed and adjusted as necessary.
- True
- False
Answer: True
Explanation: It’s crucial to continually monitor and adjust risk responses to maximize their effect and cope with changing project conditions.
Multiple Select: Consider the role of a PMI Risk Management Professional. Which tasks would this person typically perform during the ‘Implement Risk Responses’ process?
- A) Monitoring changes in risk over time.
- B) Analyzing risks to see how they affect project constraints.
- C) Taking planned actions to address risks.
- D) Documenting the outcomes of risk response actions.
Answer: C) Taking planned actions to address risks. and D) Documenting the outcomes of risk response actions.
Explanation: The ‘Implement Risk Responses’ process involves taking planned actions to address risks, and then documenting the outcomes for future reference.
Single Select: An active acceptance risk response strategy can include which of the following?
- A) Ignoring the risk.
- B) Setting aside budget reserves to cover costs.
- C) Changing the project plan to eliminate the risk.
- D) Transferring the risk to a third party.
Answer: B) Setting aside budget reserves to cover costs.
Explanation: Active acceptance of a risk often includes establishing a contingency reserve, including amounts of time, money, or resources to handle the risks.
True/False: Implement risk responses only address negative risks or threats.
- True
- False
Answer: False
Explanation: Implement risk responses can address both negative risks (threats) and positive risks (opportunities).
Single Select: Which of these is not a strategy when dealing with positive risks or opportunities?
- A) Enhance
- B) Mitigate
- C) Exploit
- D) Share
Answer: B) Mitigate
Explanation: Mitigate is a strategy used for negative risks or threats, not for positive risks (opportunities).
Multiple Select: The implement risk responses process creates which of the following outputs?
- A) Change requests
- B) Risk register updates
- C) Project management plan updates
- D) Project documents updates
Answer: A) Change requests, B) Risk register updates, C) Project management plan updates, D) Project documents updates
Explanation: All these are outputs of the process as risk responses can often result in suggested changes to project plans, updates to the risk register and other project documents.
Great post! Implementing risk response is such an important aspect of PMI-RMP.
Thanks for sharing this. I found the section on risk transfer particularly useful.
Does anyone have a real-life example of using risk mitigation effectively?
Appreciate the detailed explanation on risk acceptance.
Can someone explain the difference between risk avoidance and risk mitigation?
The blog is informative, but I think it could include more about qualitative vs quantitative risk analysis.
Very helpful post. Anyone preparing for PMI-RMP should read this.
Fantastic post. The examples really bring the concepts to life.