The project team should begin in defining the steps for responses to opportunities and threats. A risk response is performed whenever, a new risk is identified, an existing risk changes, influential factors change or new information about the project surfaces.
When developing a project's risk response, it should be approached it from a project-wide perspective. Relationships between risk events are extremely important. The project team should develop risk responses for each risk event within the sphere of project influence and control.
The following documents can be used to assist in developing the project's risk response plan:
- List of the project's risks, opportunities and threats;
- Project Contract;
- Statement of Work or Scope of Work;
- Schedule;
- Resource List; and
- Any other pertinent information.
Risk Response Strategies
There are four (4) ways to effectively deal with risk.
- The first is avoidance. Risk can be eliminated usually by eliminating the cause. An example of this is using a less complicated or less sophisticated programming language.
- The second is mitigation. This is done by reducing the risk event probability, risk event value or both. An example of this is using redundant hardware design;
- The third is acceptance. The project team could just decide to accept the consequences and take it from there. An example of this is changing the relationships on a schedule, thereby making one or more of the tasks in the sequence late.It the late task(s) are not critical, the project team will just let it be.
- The fourth is transference. This is done by removing the impact or consequences of the risk event. It is important to make this distinction from mitigation. An example of transference is gathering information through user groups and not the project team.
Contingency Plans versus Project Reserves
A contingency plan involves the development of alternative courses of actions which may include changes in schedule, resources or contract. Project reserves take the form of money or time that are added to specific areas of the project and are sometimes called management of budget and schedule.
The project team should use the elements of the project plan to select appropriate risk response strategies. They need to ask the right questions such as: what can be done to mitigate risk? What should be done to transfer, reduce the probability, reduce the impact or what is the best combination?
What about avoiding the risk: how should that be done? What could happen if the risk was accepted? What are the triggers for each of the high priority risks, since some triggers can take the form of missed milestones?
Finalizing the Risk Plan
The project team needs to document all assumptions regarding the selected strategies and develop multiple strategies for each major risk identified. They should determine the feasibility of each of the following alternatives:
- Cost implications;
- Schedule implications;
- Resource availability implications; and
- Introduction of new risks.
Alternatives should be prioritized based on the project's constraints. The project plan documents should be updated to include the risk mitigation measures. However, originals must still be kept.
The risk management plan identifies the priority of risks, identifies risk metrics, identifies risk owners and delineates all risk event triggers. It also explains how the risk plan will be maintained and implemented.
Results of Risk Response
- The team knows who is responsible;
- The team has a strategy;
- The team knows what to do and how much;
- The team knows when to do it;
- The team has a plan; and
- The team knows how to track success.
Approach the risk response effort from a project-wide perspective. Integrate the project parameters into the risk response development effort. Develop at least three (3) alternatives to handle the high-priority risks.
Review the medium level risk list and develop at least one strategy for those with the potential of becoming a high level risk. Update the appropriate project documents to reflect the response strategy.
Finally, but still extremely important, communicate the completed plan to all stakeholders and retain the original risk management plan for tracking purposes.
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