Concepts
Central to this process is the ability to plan effective risk responses. For professionals preparing for the Project Management Institute’s Risk Management Professional (PMI-RMP) exam, a good understanding of this step is paramount. The technique lays a solid foundation for addressing potential threats and opportunities that could impact project goals.
Defining Risk Response Planning
Risk response planning is the process of developing options and determining measures to enhance opportunities and mitigate threats to the project’s objectives. It is built upon the basis of a well-executed risk analysis and identification processes. These plans should be realistic, achievable, and within the project’s budget constraints.
It is important to note that risks inherent in a project are not always negative. They can also present potential opportunities. Therefore, a risk response can either be created to reduce potential negative impacts or enhance potential positive impacts.
Risk Response Strategies
Four basic risk response strategies are widely applied and understood in project management.
- Avoidance: This involves changing the project plan to eliminate the threat entirely or to protect project objectives from its impact.
- Transference: This means shifting the impact of the threat to a third party, along with the ownership of the response.
- Mitigation: This strategy aims to reduce the probability and impact of a particular risk to an acceptable threshold.
- Acceptance: This happens when the project team decides not to change the project plan to address a specific risk. It is applied when the cost of other risk response strategies outweighs the possible impact of the risk.
Each of these has its strengths and weaknesses, and the choice of strategy will depend on the specifics of the project and the risk concerned.
| Risk Strategy | Advantage | Disadvantage |
|---|---|---|
| Avoidance | Completely eliminates the risk | Can be costly and may impact project timeline |
| Transference | Reduces need for management effort | Can cost money or not entirely eliminate risk |
| Mitigation | Reduces impact and probability of risk | Can be costly and time-consuming |
| Acceptance | No additional cost in short term | Potential negative impact if risk occurs |
Applying Risk Response Planning
When applying these techniques and processes, consider the following steps:
- Analyze each identified risk: Apply benefit-cost analysis to balance the cost of mitigating the risk against the potential benefit gained.
- Choose the most appropriate risk response: Not all risks can be avoided, and sometimes, accepting the risk might be the most feasible approach.
- Develop risk response plans: These plans should detail how to respond if the risk event occurs. It includes the roles and responsibilities of each team member in mitigating the risk.
- Implement the risk response plan: Once the plan is solidified, the project team would need to execute the plan in the event the risk happens.
- Monitor and control risk: Continual tracking of identified risks, monitoring residual risks, and identifying new ones is critical through the entire project lifecycle.
Conclusion
Effectively planning for risk response not only contributes to a successful project outcome but also ensures that potential issues are addressed before they spiral out of control. Understanding these processes and strategies is key to passing the PMI-RMP exam. Candidates should also practice applying these techniques in different project scenarios to gain familiarity and a deeper understanding.
Answer the Questions in Comment Section
True or False: ‘Plan Risk Responses’ is a strategy that includes identifying, assessing, and controlling uncertainty in a project.
- True
- False
Answer: True
Explanation: The plan risk responses process primarily focuses on identifying strategies to address specific risks to improve project outcomes.
Select the correct definition of Risk Response:
- A) Avoiding the risk by eliminating the cause
- B) Accepting the consequences of the risk
- C) Minimizing the impact of the risk
- D) Both A and C
Answer: D) Both A and C
Explanation: Risk response could either be an avoidance tactic where the cause of risk itself is eliminated or a mitigation tactic where the impact of the risk is minimized.
True or False: Acceptance is a proactive risk response strategy.
- True
- False
Answer: False
Explanation: Acceptance is a passive risk response strategy which essentially means that nothing can be done to mitigate the risk, and if the risk occurrence happens, we accept its impact and deal with it.
Identify the risk response strategy where the effect of the risk is increased.
- A) Enhance
- B) Share
- C) Exploit
- D) Mitigate
Answer: C) Exploit
Explanation: Exploit is a strategy under positive risk response where we make sure that a positive risk (or opportunity) will definitely occur to ensure we take maximum advantage from it.
Multiple Select: Which of the following risk response categories can be classified as active response strategies?
- A) Acceptance
- B) Transference
- C) Mitigation
- D) Escalation
- E) Enhancement
Answer: B) Transference, C) Mitigation, D) Escalation, E) Enhancement
Explanation: These strategies involve active efforts to reduce, share, escalate or optimize the effect of the risk, unlike acceptance that is a passive strategy.
True or False: ‘Plan Risk Responses’ is the process of assigning people to take responsibility for risks.
- True
- False
Answer: True
Explanation: One of the key aspect of planning risk responses is to assign an owner for each identified risk who will take the responsibility to carry out the selected response.
Which of the following best defines ‘Transference’ as a risk response strategy?
- A) Reducing the negative risk or enhancing the positive risk
- B) Passing the risk to a third party
- C) Eliminating the risk
- D) Increasing certainty about the risk
Answer: B) Passing the risk to a third party
Explanation: Transference involves shifting the risk or its impact to a third party, often through a contract such as insurance.
Which strategy involves developing an action that will cause a risk to materialize?
- A) Avoid
- B) Transfer
- C) Accept
- D) Exploit
Answer: D) Exploit
Explanation: Exploit strategy is used to increase the probability of beneficial opportunities by ensuring that they are realized.
True or False: Risks with high impacts and high probability should be escalated.
- True
- False
Answer: True
Explanation: Risks that are high in both impact and probability should be escalated to higher management levels because managing these risks might need additional resources or decisions made at a higher level.
Multiple Select: “Plan Risk Responses” involves which of the following actions?
- A) Identification of risks
- B) Selection of risk strategies
- C) Assignment of risk owners
- D) Reviewing risk register
Answer: B) Selection of risk strategies, C) Assignment of risk owners, D) Reviewing risk register
Explanation: Though risk identification is part of the risk management process, it does not fall under ‘Plan Risk Responses’. The other actions all contribute to an overall strategy to handle project risks.
Great article on Plan Risk Response! It really helped clarify the concept for my PMI-RMP exam prep.
I appreciate the detailed explanation of risk response strategies. Thanks for the useful post!
Glad to find such comprehensive material on risk response planning. Keep it up!
Excellent breakdown of mitigation strategies. Exactly what I needed for my studies.
Can someone explain why it’s important to have a contingency plan as part of the risk response strategy?
Contingency plans are vital because they provide a predefined action plan for identified risks. This can help mitigate the impact if the risk occurs.
Adding to that, contingency plans also ensure that you are prepared and can respond quickly, minimizing the project’s disruption.
How do you prioritize risks when developing response strategies?
Typically, risks are prioritized based on their impact and likelihood. You use tools like a risk matrix to help visualize and prioritize them.
You should also consider the project’s objectives and the stakeholders’ risk tolerance when prioritizing risks.
I found the section on transferring risks particularly interesting. Transferring to insurance seems like a smart move.
What are the main challenges you face when implementing risk response strategies?
Often it’s a lack of resources and buy-in from stakeholders. If the team doesn’t see the value, it’s harder to implement effectively.
Another challenge can be accurately predicting the impact of a risk and how effective your response will be.