Peter Hammonds* Risk response strategies are important in any business or professional occupation. Dealing with ‘risk’, which is uncertainty, the scenarios for developing a suitable strategy is boundless.
The risk response strategies will be developed by project managers who oversee the project, including budgetary, production and risk management strategies that are needed to create successful projects.
Ensuring that the right risk response strategies are in place can be fundamental to the success of the project and the different strategies will determine its ultimate result. There is a major difference obviously between positive risks and negative risks and drawing up a risk response plan to deal with both is a key factor in having a top risk response strategy in place.
In a project management sense they will be strategies that reduce risk in the implementation of projects ranging from software implementation to warehouse management, to logistics to staffing.
Effectively, the ‘risk owner’ is someone who wants to mitigate the uncertainty and ensure that risk responses are in place so that there is no impact upon the business or profession.
Sometimes there will acceptance of risk as a part of working or professional life. There are a multitude of types of risks depending upon the project being developed or embarked upon. Sometimes there will simply be passive acceptance of the risk and sometimes a project management plan that has undertaken a scope of potential risk will develop a risk management process.
Every project is different and so too are the risk response strategies that should be adopted in the case of some uncertain event that will affect the project’s success.
What Characterizes ‘Risk’
The key factor is the likelihood or probability of a risk. Once that is calculated or assessed, there is the question of what effect the risk event would have? What would be its impact?
What is the Project That is To Be Assessed
Knowing what the actual project that is under development or which is being implemented is something that is fundamental to understanding the risk management issues surrounding it.
The project scope and the goal of the project must be clearly defined and communicated to the project management team. This is basic to the success of the new project.
A project will be developed within a certain time frame and within a budgetary limit. To ensure it is delivered will also mean that it must be carefully assessed against the outcomes that are required and within the time and budget restraints.
Plus, of course, the project is also necessarily something that is new or at least involving multiple objectives and tasks, all of which must be dealt with within the framework of the abovementioned constraints.
All of which adds up to a risk profile. there will be project risks just as there will be project objectives. These are key factors that the project team needs to know in order to properly ensure there is identified risk and that the types of risk are property accounted for.
What Are the Necessary Risk response Strategies?
The key elements of risk response strategies that will ensure the project is implemented successfully (that is, within time, budget and in terms of deliverables) involves some key strategies.
First, understand what the risks actually are. these can be numerous, or even seemingly innumerable.
Second, you must analyze them in terms of the chances of them happening and what the effect would be.
Third, what are the risk profile – the strategies you need to manage that risk.
Four, you must take necessary action to ensure you are monitoring what is happening through reviews and reports.
Project risk management is something that will reduce the risk or risks.
How Many Risk Strategies Are There?
This is something that is unanswerable to the effect that the strategies will be dependent uopn the nature of the project.
Let us consider something like the deployment of a new software program through a professional services organization like a law firm.
What are the risks that must be taken into account and what strategies should be used to assess them and deal with them?
The risks of software deployment or development can be either external or internal and involve coding problems, unmet expectations, unrealistic goals, poor implementation and so forth.
What Strategies Should Be Used?
Eliminate the Risk
The obvious first strategy would be to eliminate the risk once it is identified. For instance, with our software system implementation there may be a virus susceptiability that would negatively affect the entire system and thus the vital security and confidentiality of the law firm’s operations.
the impact of the risk is vast. Once the probability of the risks of the virus susceptibility are properly assessed in terms of the project and its impact then the elimination strategy must be used as the best risk strategy and one that will ensure the project’s success (unless it is abandoned).
The removal of the risk may involve using different processes, hardware or other factors, not necessarily abandonment. But the overall project risk must be clearly identified and action taken.
Reduce the Effect of the Risk – or The Probability of It Occurring At All
This involves a reduction in the impact of the risk in the event that it occurs. It is one type of risk response strategy that must be used and should be an essential element of any risk response planning that is undertaken.
A good action plan must ensure that a high risk situation sees the best response taken and that may also involve a consideration of what the risk tolerance is from changing, for instance, software specifications to reduce security issues.
the key issues here are the reduction of risk impact (which assumes a degree of risk acceptance) and adopting an effective strategy to reduce the probability of the risk occurring at all. Both of these involve a clear risk analysis that identifies the particular risk or risk that exist.
Risk Transfer
Sometime risk for the project and its owner can be transferred to avoid or mitigate the negative impact of risk, through some contractual agreement, sub-contract or through some other aspect to the project that involves the risk transfer, which is part of the risk management plan.
An insurance policy to cover such risk factors might be taken at the beginning of the project or at some other time, which is common in some industries like with construction projects for instance, but where the insurer takes on the project risk. However even with insurance it is vital to ensure that the project risk strategy carefully and very precisely identifies the risk issues.
For our legal project, for instance, this should not be a particular problem given the parties involved but insuring project risk can be a fraught process and requires particular attention to the full risk profile and in particular to identify the aspect of the project that might go wrong.
The use of stringent penalty clauses, guarantees and other contractual arrangements can also serve to transfer the risk to the third party as often-used transfer risk response strategy techniques.
Having a Plan B
Having a fallback plan is something else that should be developed once the risks of the project are properly assessed and as an essential part of project risk response strategies that should be used for major projects.
The essential elements of the fallback plan should be identified, a contingency included in the project budget and a proper and appropriate risk response strategy incorporated in the plan.
Key Project Management Risk Strategy Resources
Check the PMBok Guide, the Guide to the Project Management Body of Knowledge which is Project Management Institute’s flagship publication and is a fundamental resource for effective project management in any industry.
The Best Project Management Software 2022 resource, identifying major software resources to assist with project management.
Goal Directed Project Management, published by Kogan page.
How To Identify the Right Project Management Strategy, by Shayna Joubert, NE University
Project Central, resources and blog
Author
Peter Hammonds is a technical writer who writes on management processes, software deployment, agile management and related issues.