What is the risk? Most of us understand risk as an uncertain event that can impact us negatively; however, as per PMBOK® Guide Risk exists at two levels within every project; Individual project risk and overall project risk.
An individual project risk is an unknown event or situation that, if it occurs, has a positive or negative impact on one or more project goals.
Overall project risk is the impact of uncertainty on the project as a whole, resulting from all causes of uncertainty including individual risks, describing the exposure of stakeholders to the implications of variations in project outcome, both positive and negative.
In this article, today I’m going to discuss at length about response strategies to the negative risks. Negative risks are commonly referred to as threats. The five basic strategies to deal with negative risks or threats are Escalate, Avoid, Transfer, Mitigate and Accept. Risk strategy is applied on the basis of the risk exposure. Now, how do you evaluate risk exposure, you do it on the basis of risk probability and its impact on the project objectives? ‘Avoid’ and ‘mitigation’ strategies are usually effective for critical risks where risk exposure is more than risk threshold agreed for the project, while ‘transfer’ and ‘accept’ are usually good strategies for less critical threats.
Risk mitigation is a risk response strategy whereby the project team acts to reduce the probability of occurrence or impact of a risk. –
Risk transference is a risk response strategy whereby the project team shifts the impact of A threat to a third party, together with ownership of the response.
Risk acceptance is a risk response strategy whereby the project team decides to acknowledge the risk and not take any action unless the risk occurs. Here, it is very important to understand that risk acceptance can be either active or passive. In Passive acceptance project team decide to take care of risks as they occur. On the other hand, the active acceptance asks the team to establish the contingency reserve, including amounts of time, money, or resources to handle the risks as it occur.
Hope, by now you must have understood what all negative risk response strategies we have. Risk response strategy is a very scoring topic from PMP® exam point. It is crucial to know that the identification of risk response strategy is not a one time activity rather in each risk review meeting team looks at the risk register and reassess the probability and the impacts of the risk, and based on this reassessment, the team may identify different response strategy for a given risk. Risk: “Smoking can cause cancer”
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