Join Bob McGannon for an in-depth discussion in this video Determining the appropriate response, part of Project Management Foundations: Risk.
The average project manager considers responses to each high priority risk. Better project managers look at each of their risks, and consider all four types of risk response: avoidance, transference, mitigation, and acceptance. The best project managers further define their response strategy by considering three other factors in choosing the appropriate response strategy. The first consideration is the tradeoff between your triple constraints of time, scope, and cost.
As the quote goes, "You can spend money to save money." But that is not always the best approach. For example, if time is your number one driver, you may use cost to get around the time constraints. This could involve using additional resources to make sure activities are done on time. Or you could reduce the scope or functionality of your products, to make sure you deliver your project in the desired time frame. If scope is the number one priority, you may have to incur additional costs, or consider adding time to your schedule.
You should consider trading other than the risk-impacted triple constraint element to determine the best alternative. Second consideration when investigating risk treatments is to determine if your risk response actually adds other risks. If so, are they manageable? For example, as a means of ensuring you get the right skills when you need them, you may contract with two specialized technical skill providers. Adding a second vendor may reduce your risk of getting skills on time, but may add other risks, such as contract management risks, if you have never worked with that vendor before.
The fact that a risk response adds other risks is not uncommon. You just have to be sure you evaluate the nature of any new risks you may introduce to your project with your risk responses. The third consideration I want to share, is to examine when you have to make the decision to execute that strategy. Let me explain this concept. Let's say risk response option A is going to take you two months to put in place, and will cost $4,000 to execute.
You will likely have to decide to execute this response strategy long before you can tell for certain that the risk will come to fruition. In contrast, risk response option B will cost $4,500, but you can execute it immediately before the risk occurs. If both of these response options have an equal chance of reducing the impact of the risk, you might choose option B over A. This is because option B, although slightly more expensive gives you a greater chance of spending nothing at all on a risk response, if you can determine if the risk won't come to fruition at all, and not need a response.
It gives you the advantages of not having to play your cards too early. The last consideration is the speed with which you can get permission to execute a response strategy. If two options are similar in their cost and effectiveness to reduce the risk, it is usually best to choose the response action you can execute more quickly. This gives you more flexibility in determining if and when a response is needed to a given risk. You can take more time to be more decisive, or collect more data before spending additional funding.
So, financials are not the only consideration when choosing your risk response strategies. Considering other factors that allow you more management flexibility, or the ability to trade off less sensitive project constraints to help others, is a great way to demonstrate your prowess in considering alternatives for treating your project risks.
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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.