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 occurrence, 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.
Risk Response for Positive Risks:
Exploitation: “I want to take advantage of an opportunity” strategy. We know there is a sure thing happens with this risk. Plan all actions to get more results of that. In this way we are increasing the impact. For example adding talented resources to reduce project time.
Sharing: “Having partnership in utilizing maximum advantage” strategy. Leaving ownership of the risk to another party who can tap the opportunity for our benefit. Good example on this is outsourcing to specialized groups.
Enhancing: “Getting it done by doing the right things” strategy. Identify few enhancers or drivers for the event, perform that in such a way it increases the probability and/or impact of it.
Acceptance: “In case of risk occurrence, nothing to do” strategy. Though this is a worst negative response strategy, it is a nice one for positive risks. No need to throw stones on the tree, fruit automatically falls on your lap in the windfall!