Part 84: Strategies for Overall Project Risk
(Project Risk Management: Plan Risk Responses)

  • We should plan responses for each individual risk (threats and opportunities) and for the overall risk
  • There are five strategies to deal with overall project risk: Escalate, Avoid, Transfer, Mitigate, or Accept
  • Avoid
    • When the overall risk is negative, and we have exceeded the risk threshold, we should Avoid the risk
    • We act to bring the project back into the risk threshold
    • Remove high-risk components of the project’s scope, or cancel the project
    • For example, we’re designing a vehicle.  The vehicle should cost $40,000, but raw material costs have increased and there is no way to bring the cost below $60,000.  We can’t sell a $60,000 vehicle.  Therefore, we cancel the project.
  • Exploit
    • When the overall risk is positive and large, we should Exploit the risk
    • For example, we’re designing a vehicle.  The vehicle should cost $40,000, but raw material costs have decreased, and the vehicle can now be manufactured for $30,000.  We stockpile as much raw material as possible.
  • Transfer/Share
    • When the overall risk is high (positive/negative), we may bring in a third party to manager the risk on our behalf
    • For negative risks, a possible response is obtaining insurance to protect us from the adverse effects of the risks
    • For positive risks, we can share ownership with another group, such as the buyer
    • For example, we’re designing a vehicle.  The client has requested multiple changes to the design, which caused the cost and estimated completion date to increase.  The client agrees to share the additional cost of the project and accept the delays.  This is a transfer in the negative risk.
    • For example, we’re designing a vehicle.  The client has requested multiple changes to the design, which are expected to increase the design’s popularity (and therefore its profits).  The client agrees to share the additional profits.  This is a share of the positive risk.
  • Mitigate/Enhance
    • We change parts of the project so that the effect of negative risks is reduced or so that the effect of positive risks is increased
    • Mitigation is used for negative risks
    • Enhancement is used for positive risks
    • For example, we’re designing a vehicle.  We conduct a survey of potential consumers to determine the features that they like and dislike.  They provide positive and negative feedback on the vehicle’s features.  We include positive features in the vehicle (enhance) and remove features that were negative (mitigate).
  • Accept
    • The positive/negative risk is outside of the project’s risk threshold, but we choose to do nothing.
    • For example, we discover that increasing the size of the vehicle’s sunroof would increase sales by 1%.  We choose to do nothing because the cost of redesigning the sunroof may not justify the increased sales.