Risk Attitude is a very important aspect of Risk Management. This is also a very important topic for the project manager to understand, because without knowing the Risk Attitude of the Project Stakeholders, he would have a problem in prioritizing and ranking the identified risks.
Risk Attitude is inherent in human nature – some people are scared of it and others enjoy. It truly depends on the person that how he looks at the risk.
Understanding the Risk Attitude of stakeholders makes the project manager well-informed about the preference and approach of stakeholders towards risks tolerance and risk threshold. Risk Attitude of Stakeholders is an Enterprise Environmental Factor that keeps on changing as the project progresses, so it is a continuous job of the project manager to keep a close eye on it.
Risk Attitude can be classified into four types:
- Risk Averse: A Risk Averse person or organization is not comfortable with digesting the risk. They are not very creative or supportive towards trying new ideas, and usually avoid the risk unless the reward to take the risk is much higher to outweigh the aversion of the risk.
- Risk Seeker or Taker: A Risk Seeking (Risk Taker) person or organization likes to seek the risk to get the chance at a big opportunity. They enjoy and find it challenging to deal with. Sometimes this excessive optimism cause them losses.
- Risk Neutral: As name suggests, these are Risk Neutral people or organizations that deal with risks objectively. These people or organizations analyse the risks, weigh them through Expected Monetary Values (EMV), decision tree method, or any other Risk Management Tool and then make informed decisions.
- Risk Tolerant: These people or organizations are very comfortable with ignoring the risks. They don’t care and never give any attention to a risk until it becomes an issue.
It is a job of the project manager to find the Risk Attitude of individual stakeholders and the Risk Attitude of any group formed by these stakeholders because the Risk Attitude of group might be different than that of an individual. So, either he has to change the attitude of the stakeholders, or adjust the project plan to reflect the Risk Attitude of stakeholders.
It is recommended for a project manager to behave as a Risk Neutral person and make decisions based on objective evidence.
You may see several questions from this topic in your PMP Certification Test.
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