Discuss the types of responses to risk

i. Avoidance
Although often not possible, this is the easiest way of removing risk from a project. It involves the removal of the tasks that contain the risk from the project.
Sometimes you can remove a small part of a project which carries a large risk factor. In this case, proactive risk management planning is a very worthwhile endeavour.
Changing the project plan to remove a risk will involve changes to the project scope, resources, and/or time, but it can be the right response.
ii. Acceptance
On the other end of the spectrum, acceptance involves planning the risk into the project. If a better response strategy cannot be identified, accepting the risk might be sufficient to proceed with the project.
Remember, all projects carry risk in some form. It is not imperative that all risk be eliminated. But they should be itemized and analyzed to the necessary extent that they are part of the project plan, and all the appropriate parties have signed on to accept the risk. Management should be notified that there could be implications to cost/time/etc. if the risk occurs.
It might be prudent to allow for a contingency – time, cost, or resources – as part of accepting a project risk.
Monitor and Prepare Similar to accepting the risk, this response can be used for major risks that carry a high probability and/or severity, but must be accepted by the project. It involves the following two things:
- Creating plans for monitoring the triggers that activate the risk.
- Building action plans that can be immediately mobilized upon occurrence of the risk.
Let’s say management imposes an unrealistic deadline. The likelihood of project schedule overruns is high. The project plan could include “Weekly monitoring of schedule variance and a notification to X personnel as soon as the schedule variance is greater than Y.” When it happens, you don’t need to think. This is an example of Monitor and Prepare.

iii. Mitigation-Since risk is a function of probability and severity, both of these factors can be scrutinized to reduce the risk of project failure.
- Probability of occurrence. Take measures to reduce the likelihood of a risk occurring. This is usually a more preferable option than reducing the severity because it’s better not to experience the risk occurrence in the first place.
- Severity. Reduce the impact of the risk on the critical success factors of the project.
Methods of mitigating risk:
1. Reduce complexity in procedures and/or operations.
2. Perform additional testing.
3. Add more resources.
4. Add time to the schedule (create a buffer).
5. Create additional or more detailed prototypes.
6. Provide additional technical training to personnel.

v. Share and transfer
Finally, you can transfer the risk onto another party. Naturally, this will usually require some form of trade-off (or cost). Shifting the consequence of a risk to a third party is not always easy but is often overlooked. Here are a few ideas:
1. Purchase insurance.
2. Outsource difficult work to a more experienced company.
3. Use a fixed price instead of unit price contract (if you’re the owner; Vice versa if you’re the vendor).
4. Remove warranties and/or guarantees.

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Titany answered the question on October 26, 2021 at 10:42