Join Bob McGannon for an in-depth discussion in this video Deciding when to execute a risk response, part of Project Management Foundations: Risk.
As the Kenny Rogers song goes, you gotta know when to hold 'em, and know when to fold 'em. Know when to walk away, and know when to run. So it goes with risk responses. Determining the right response takes some work, but determining when to pull the trigger and spend time and money on a risk response can be a tricky venture, given all the dynamics of today's projects. Project managers who understand when to execute a risk response and when to hold off, are the ones who always appear in control of their projects.
There are three ways to approach the execution of the common risk response actions of avoidance, transference, mitigation, and acceptance. The first execution approach is to execute proactively. For example, in a component design and assembly project, you may believe there's a risk in making a Telephony emponent out of fiberglass because you may need a solution that's going to be more rigid. So, using steel to make the component has been proposed as a response action.
You can address this risk proactively by spending the money and time to have sample fiberglass components manufactured ahead of time. From these samples, you can determine if the rigidity risk is viable. This gives you assurance, and is proactive, but can be very expensive in some project instances. Still, it could be money well spent. The second option is to execute a response action, immediately after an assess and respond approach. You make an assessment based on testing the manufactured parts at the prescribed time in your schedule, and then you decide on the immediate actions to take, based on the results.
If the fiberglass works well, you do not spend any money on a response action you don't need. If the risk is valid, and the fiberglass is too flexible, you have to spend the money to correct the situation by using steel and recover any delays in your schedule. The third option when deciding on a risk response is to be reactive. You change something after the impact of the risk has been felt. If the fiberglass proves not to be rigid enough once we deploy it, then we can correct it after installation.
This will probably involve some other testing processes, and coming up with a corrective action like reinforcing the fiberglass parts in some manner. It can also upset your client and your reputation. In this case, we've let the risk pan out and then reacted to it. It is not usually a very good option, but can be considered for very low probability or low cost risks. Basically, what you're trying to do is think about the right balance between your triple constraints, time, scope, and cost.
Being proactive and doing something ahead of time typically gives you the best end result when it comes to risk management, but it can have drawbacks in costs and, potentially, time. Going down the assess and respond route could cost you nothing if it works. But if the work isn't the level of quality you need, it could cost you scope and time when you least need those challenges. Being reactive could impact all three of your triple constraints. In our example, by trying to reinforce the fiberglass, it could mean you'd have to perform some redesign of the entire component, and this probably would be expensive.
Whatever the case, it pays to analyze your risks before deciding which way to execute your response. Assess the impact of the risk and really look at how much control you need to put in place and when to get the optimal risk management result.
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- Incorporating risk management into your project
- Identifying risk
- Categorizing risks
- Performing qualitative and quantitative risk analysis
- Building a risk-response plan
- Deciding when to execute a risk-response plan<br><br>
- The PMI Registered Education Provider logo is a registered mark of the Project Management Institute, Inc.