Risk Response Planning
Posted by Babou on June 14, 2008
General risk response strategies.
Risk Response for Negative Risks:
Avoidance: “I want to eradicate the risk by eliminating its cause” strategy. In this either the risk eliminated by different means or by changing the project plan. Hence probability of risk becomes zero which will improve safety to project success. This is the best possible strategy. But it is not possible to follow avoidance all the time. Example for avoidance: House construction during summer instead of rainy season.
Transference: “In case of risk occurrence, third party will bear the impact” strategy. This one is next to avoidance in terms of project safety (esp. financial risks). Here risk is not eliminated but the risk impact is transferred to another one with extra project budget cost. Example: Annual Maintenance Contract, Shop Fire Insurance, Theft Insurance, Natural Disaster Insurance.
Mitigation: “Reduce the probability & impact of risk to accepted level by good planning before hand” strategy. Mitigation is taking calculated risk. We know there could be a risk. We can not avoid it. But we know we can reduce the probability & impact by taking some measures at the start of the project. Hence we added few activities for that in execution phase.
Acceptance: “In case of risk occurance, nothing to do” strategy. This is the Worst ever strategy & most of the risk books do not call this as strategy at all ! All unidentified risks falls under this response category.
