Lesson 48: Risk practice 5 – risk responses Flashcards
What does the risk response ‘avoid a threat’ do?
The response “avoid a threat’ removes the risk: e.g., You have a supplier that is likely to go bankrupt, so you switch to a new supplier that is financially sound, and the original risk is removed.
This strategy focuses on eliminating the risk entirely.
What is the most common response to a risk?
The most common response to a risk is to reduce the likelihood or impact. Action is taken to reduce the possibility of the risk happening or reduce the effect if the risk does materialize. This decreasing likelihood or the impact of the risk is also referred to as risk mitigation.
Risk mitigation is a proactive approach to managing risks.
Give an example of a response to transfer risk.
Transfer is an option that aims to pass part of the risk to a 3rd party. The best example is taking out insurance to transfer the risk to the insurance company.
Insurance is a common method used for risk transfer.
Which risk response is this statement referring to? It seeks multiple parties to share the risk (Pain or Gain) amongst some project stakeholders.
This is the ‘share’ response. PRINCE2 gives an example of a supply chain. For example, an urgent issue needs to be solved at the end of a project, and no one is to blame. The project manager has negotiated to hire the contractor for an extra week and get a 30% discount. So, both parties share some of the pain.
Sharing risk can lead to collaborative solutions in project management.
Which risk response is taken when the project takes the chance that the risk will occur and does not do anything to reduce the risk?
This is ‘accept the risk.’ This is done when nothing much can be done, or the cost of mitigating the risk is higher than the risk’s impact.
Accepting risk is a common strategy when risks are deemed manageable.
What is another name for a contingency plan, and when would it be used?
Contingency plans can also be called ‘fallback plans.’ They provide a planned set of actions that will be taken for each risk. They are used if the risk occurs, and the risk budget funds these plans.
Fallback plans are essential for ensuring preparedness in project management.
