As we know, risks are not always bad; sometimes they can bring some opportunities as well. Negative risks or threats have a negative impact on the project objective and positive risks have a positive impact on the project objective.
Therefore, risk response strategies to manage positive and negative risks are different.
In the PMBOK Guide 5th edition, we have following strategies to manage negative risks:
The following strategies are used to manage positive risks:
In this blog post, we are going to discuss the negative risk response strategies in detail. Positive risk response strategies have been discussed in other blog post.
Okay, let’s get started.
In this type of risk response strategy, you try to minimize either the probability of the risks happening or the impact.
For example, you find that a team member may leave for certain duration during the peak of your project. Therefore, to minimize the impact of his absence, you identify another employee with similar qualifications from your organization and inform his boss that you may need him for your project for a period of time.
In transfer risk response strategy, you transfer the risk to a third party to manage it. Please note that the transfer of risk does not eliminate the risk; it only transfers the responsibility of managing the risk to the third party.
For example, in your project there is a task to install some equipment and you don’t have much experience in this type of task. Therefore, you ask a contractor to install it and sign a fixed price contract.
In this way, you have transferred the responsibility of the whole task to a third party, and now it is their responsibility to complete the task within the agreed time and cost.
Here you try to eliminate the risk or its impact on your project objective. You do this by either changing your project management plan, by making some changes to the project scope, or by changing the schedule.
For example, you observe that during certain periods of your project there is a chance of rain and you have some work planned outdoors at that time. Therefore, to avoid this risk, you move these activities to some other time to avoid the effect of rain.
This risk response strategy can be used with both kinds of risks, i.e. either positive risks or negative risks.
Here you don’t take any action to manage the risk but you do acknowledge it.
You can accept the risk either by actively acknowledging it or passively acknowledging it.
In active acceptance you keep a separate contingency reserve to manage the risk if it occurs, and in passive acceptance, you do nothing except note down the risk.
You have four risk response strategies to deal with negative risks. You will select the strategy to manage the risk depending on the type of risk. If you see that you can manage the risk, you will go for the mitigation risk response strategy. If you see that a third party is better equipped to manage the risk than you, you will go for the transfer risk response strategy. If you find it difficult to manage the risk in any way, you will avoid it. And in the accept risk response strategy, you just acknowledge the risk and note it down and decided to manage it only if it happens.
This post was all about the negative risk response strategies. This topic is very important from a PMP and PMI-RMP exam point of view. You are going to see a lot of questions on this topic in your exam. Therefore, understand these concepts well before attempting the exam.
Here is where this blog post on negative risk response strategies ends. If you have something to share, you can do so through the comments section.