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Chapter 4 Risk Response Planning

The document discusses developing risk response plans by determining options to enhance opportunities and minimize threats. It covers inputs, tools, techniques and outputs for risk response planning including strategies like avoidance, transfer, mitigation and acceptance.

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56 views24 pages

Chapter 4 Risk Response Planning

The document discusses developing risk response plans by determining options to enhance opportunities and minimize threats. It covers inputs, tools, techniques and outputs for risk response planning including strategies like avoidance, transfer, mitigation and acceptance.

Uploaded by

adabotor7
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPT, PDF, TXT or read online on Scribd
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Chapter 4

Risk Response Planning


Risk Response Planning

Objectives
Develop options and determine actions to enhance

opportunities and minimize threats to project objectives.


Assign responsibility to individuals or parties for each risk

response.
Risk Response Planning
Criteria for risk response
Risk response must be:

 Proportional to the severity of the risk.


 Cost effective.
 Timely.

 Realistic.

 Accepted by all parties involved.


 Owned by a person or a party.
Fig 1. Risk response planning: inputs, tools and techniques, and outputs
Risk Response Planning

Inputs to Risk Response Planning


1. Risk management plan.
 Major elements from the plan needed include roles &
responsibilities, budgets and schedule for risk management
activities, risk categories, definitions of probability & impact, and
the stakeholders’ tolerances.
Risk Response Planning
Inputs to Risk Response Planning cont.
2. Risk Register
Reference will be made to:

 List of prioritized risks from qualitative and quantitative risk


analysis.
 Probabilistic analysis of the project from quantitative risk analysis.
 Probability of achieving the cost and time objectives.
 List of potential responses. In the risk identification process, actions
may be identified that respond to individual risks or categories of
risks.
Risk Response Planning
Reference will be made to cont.
5. Risk thresholds. The level of risk that is acceptable to the organization will
influence risk response planning.

6. Risk owners. A list of project stakeholders able to act as owners of risk


responses. Risk owners should be involved in developing the risk responses.

7. Common risk causes. Several risks may be driven by a common cause. This
situation may reveal opportunities to mitigate two or more project risks with one
generic response.

8. Trends in qualitative and quantitative risk analysis results. Trends in results can
make risk response or further analysis more or less urgent and important.

9. Watch list of low priority risks.


Risk Response Planning

Tools & Techniques for Response Planning

1. Strategies for negative risks (Threats)

2. Strategies for positive risks (Opportunities)


Risk Response Planning

1. Strategies for negative risks (Threats)


 Risk Response may be one of several strategies.

I. Avoidance

II. Transfer

III. Mitigate

IV. Accept
Risk Response Planning
Strategies for negative risks cont.

I.Risk Avoidance
 Risk avoidance is done by

 changing the project plan to eliminate the risk or the condition that
causes the risk in order to protect the project objectives from its
impact.
 Relaxing the relevant objective (extend the schedule, reduce
specification requirements, reduce scope)

 Not all risks can be avoided, but some may.


Risk Response Planning
I. Risk Avoidance cont.
 Examples of Risk Avoidance
 Add resources or time.
 Adopt a familiar approach instead of an innovative one.
 Avoid an unfamiliar subcontractor.
 Clarify requirements.
 Improve communication
 Obtain information
 Acquire expertise.
 Reduce scope to avoid high-risk activities
Risk Response Planning
II. Risk Transfer
 Transfer the risk to a third party who will carry the risk impact and
ownership of the response.
 Risk Transfer is most effective in dealing with financial risk exposure.
 Risk transfer nearly always involves payment of a risk premium to the
party acquiring the risk. Examples of risk transfer are:
 The use of insurance, performance bonds, warranties and

guarantees.
 Contracts may be used to transfer liability for specified risks to

another party.
 Use of a fixed price contract may transfer risk to the seller if the

project’s design is stable.


 A cost reimbursable contract leaves more of the risk with the

buyer, but it may help reduce cost if there are mid-project


changes.
Risk Response Planning
III. Risk Mitigation (Reduction)
 Risk mitigation aims at reducing the probability and/or impact of a risk

to within an acceptable threshold.


 The probability/Impact should be mitigated before the risk takes place.

Thus avoiding to deal with the consequences after the risk had
occurred.
 Mitigation costs should be appropriate given the likely impact and

probability of the risk.


Risk Response Planning
III. Risk Mitigation (Reduction)
 Examples of Risk mitigation
 Implementing a new course of action that will reduce the
problem, e.g. adopting less complex processes, conducting more
engineering tests, or choosing a more stable supplier.
 Changing conditions so that the probability of the risk occurring is

reduced, e.g. adding resources or time to the schedule.


 Prototype development to reduce the risk of scaling up from a

bench scale model.


 Where it is not possible to reduce probability, a mitigation

response might address the risk impact by targeting linkages that


determine the impact severity. For example, designing
redundancy into a subsystem may reduce the impact that results
from a failure of the original component.
Risk Response Planning
IV. Risk Acceptance
 Acceptance indicates a decision not to make any changes to the
project plan to deal with a risk or that a suitable response strategy
cannot be identified. This strategy can be used for both negative
and positive risks
 There are two types of acceptance:
 Active acceptance: may include developing a contingency plan
to execute should a risk occurs.
 Passive acceptance: requires no action. The project team will
deal with the risk as it occurs.
Risk Response Planning
IV. Risk Acceptance cont.
 A contingency plan is developed in advance to respond to risks that arise

during the project. Planning would reduce the cost of an action should
the risk occur. Risk triggers, such as missing intermediate milestones,
should be defined and tracked.
 The most usual risk acceptance response is to establish a contingency

allowance, or reserve, including amounts of time, money or resources to


account for known risks. The allowance should be determined by the
impacts, computed at an acceptable level of risk exposure, for the risks
that have been accepted.
Risk Response Planning
2. Strategies for positive risks (Opportunities)
 Strategies for positive risks are:

1. Exploit

2. Share

3. Enhance
Risk Response Planning
 Strategies for positive risks cont.

1. Exploit the opportunity

 Ensure that the risk event happens by eliminating the


uncertainty to take advantage of the opportunity.
 Examples: assign qualified personnel, select an
appropriate project delivery, provide better quality.
Risk Response Planning
 Strategies for positive risks cont.

2. Share the risk

 Allocate ownership to a third party who has a better


chance of achieving the required results.

Examples: joint ventures, partnerships, rewards.


Risk Response Planning
 Strategies for positive risks cont.

3. Enhance

 Increase the likelihood of occurrence or the impact of the


of the event
 Improve chances for the event to happen so the
opportunity becomes more certain
 Consider how the impact can be increased and choose a
course of action that in the increased impact
Risk Response Planning
 Strategies for positive risks cont.

3. Accept the risk

 See slide on Risk Acceptance


Risk Response Planning
Outputs from Risk Response Planning

1. Risk Register Updates


 The risk register is updated to reflect the results of the
response planning process.
 Level of detail of documenting a risk should be appropriate
to the ranking of the risk (high risks in detail, low risks by
listing)
Risk Response Planning
Risk Register Content: Items in the risk register
Identified risks, their description, the area of the project affected, their
causes and how they may affect project objectives.
Risk owners and assigned responsibilities.
Results from the qualitative and quantitative risk analysis processes.
Agreed response strategies
Specific actions to implement the response plan; Budget and schedule
activities for responses; Symptoms and warning signs for risks’
occurrence
Contingency plans with triggers and ccontingency reserves.
Risk Response Planning
Results from Risk Response Planning
2. Project Management Plan Updates
The project management plan is updated to incorporate response activities
including reflecting impact on cost and schedule.

3. Contractual agreements
Contractual agreements are prepared to specify each party’s responsibility
for specific risks, should they occur. This include agreements for insurance,
services, and other items as appropriate in order to avoid or mitigate
threats.

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