Assess impact of residual and secondary risks on project objectives

A. Residual Risks

Residual risks are those that remain after all risk response activities have been implemented. They persist despite the best efforts to eliminate, mitigate, or otherwise handle them.

Example: Imagine a construction project where the risk of equipment failure is mitigated through regular inspection and maintenance; however, the risk of unexpected equipment breakdown still lingers. This is the residual risk.

B. Secondary Risks

Secondary risks emerge as a direct consequence of implementing a risk response. This means they are generally unforeseen and comes as a result of dealing with another risk.

Example: In the earlier example, to mitigate the risk of equipment failure, the project team may decide to introduce a new piece of machinery. This new machine raises a secondary risk of requiring specialized training for staff, which could cause delays or problems if not handled correctly.

II. Impact of Residual and Secondary Risks on Project Objectives

A. Impact of Residual Risks

Residual risks, being those that remain after risk response planning and implementation, can subtly undermine project objectives. Even when steps are taken to manage project risks, residual risks can still pose threats to the project’s schedule, cost, or quality.

B. Impact of Secondary Risks

Secondary risks, on the other hand, have the potential to derail a project if not identified and handled promptly. As these risks emerge from the implementation of risk responses, project managers need to remain vigilant and adaptive, even while dealing with primary risks.

Table 1: Impact of Residual and Secondary Risks

III. Managing Residual and Secondary Risks on Projects

Project managers should include provisions in their risk management plans for residual and secondary risks.

A. Managing Residual Risks

For residual risks, the strategy is usually acceptance, as these risks are often impossible to eliminate entirely. Instead, project managers should focus on monitoring these risks and having contingency plans in place should they materialize.

B. Managing Secondary Risks

The management of secondary risks starts with their rapid identification as soon as they emerge. Equivalent to other project risks, secondary risks require a risk response strategy defining how the risk will be handled if it occurs.

Table 2: Managing Residual and Secondary Risks

In conclusion, the impact of residual and secondary risks on project objectives is substantial and requires dedicated handling. Understanding and applying these principles is a crucial aspect of the PMI-RMP exam and is critically necessary for effective project management in general.

Remember, project risks, whether they are residual or secondary in nature, are inevitable. The key to success lies not in eliminating all risks but in effectively managing them – thereby minimizing their impact on project objectives.

Practice Test

True or False: Residual risks are those risks that remain after planned responses have been implemented.

• True
• False

Answer: True

Explanation: Residual risks are those risks that are left over after planned risk response strategies have been implemented. These are the risks that have not been completely eliminated.

Which one of the following is NOT a type of secondary risk?

• a) New risks that arise as a result of implementing risk responses.
• b) Risks that emerge during the final stages of the project.
• c) Risk that arises out of no direct relation to the project.

Answer: c) Risk that arises out of no direct relation to the project.

Explanation: Secondary risks are risks that arise as a direct result of implementing a risk response. They do not arise out of the blue or without a direct relation with the project.

Multiple Select: Which of the following are potential impacts of residual and secondary risks on project objectives?

• a) Delays in project completion.
• b) Cost overruns.
• c) Lower overall project quality.
• d) Increased stakeholder satisfaction.

Answer: a) Delays in project completion. b) Cost overruns. c) Lower overall project quality.

Explanation: Residual and secondary risks can cause delays in the project schedule, increase costs, and lower the quality of project outcomes. They generally do not increase stakeholder satisfaction.

True or False: Secondary risks have no potential to impact the project objectives.

• True
• False

Answer: False

Explanation: Secondary risks, which emerge as a result of implementing risk responses, can significantly impact project objectives. They can cause delays, increase costs, or degrade the quality of the final project outcomes.

What is the primary purpose of assessing the impact of residual and secondary risks?

• a) To ensure that all risks have been identified.
• b) To identify necessary changes in project plan.
• c) To prepare for worst-case scenarios.

Answer: b) To identify necessary changes in project plan.

Explanation: The primary purpose of assessing these risks is to identify necessary adjustments to the project plan in order to manage these risks effectively.

True or False: Secondary risks are always negative and undesirable.

• True
• False

Answer: False

Explanation: Secondary risks, like all risks, can also have positive impacts (called opportunities) along with negative impacts (called threats).

Which risk management strategy deals mainly with the impact of residual and secondary risks?

• a) Risk avoidance
• b) Risk monitoring
• c) Risk transfer

Answer: b) Risk monitoring

Explanation: Risk monitoring is a process of continuously tracking and reviewing identified risks and the effectiveness of risk responses, which includes managing residual and secondary risks.

True or False: Quantitative risk analysis techniques can be useful in assessing the impact of residual and secondary risks on project objectives.

• True
• False

Answer: True

Explanation: Quantitative risk analysis techniques, such as Monte Carlo simulations or sensitivity analysis, can be used to assess the combined impact of all identified project risks, including residual and secondary risks.

True or False: Secondary risks always have less significant impact to project objectives than primary risks.

• True
• False

Answer: False

Explanation: The impact of secondary risks depends on the specific circumstances and could be more or less significant than the impacts of the primary risks.

The impact of residual and secondary risks on project objectives can be assessed by:

• a) Conducting a root cause analysis.
• b) Implementing risk avoidance strategy.
• c) Doing a risk reassessment.

Answer: c) Doing a risk reassessment.

Explanation: A risk reassessment is a process where all risks, including residual and secondary risks, are reevaluated for the possible impact on project objectives and to adjust the risk responses accordingly.

Interview Questions

What is a residual risk in project management?

Residual risk is the part of the identified risk that remains after all risk response activities have been implemented. This risk is known and is accepted and controlled in the project management process.

What is a secondary risk in project management?

A secondary risk is a risk that arises as a direct consequence of implementing a risk response. This kind of risk emerges from the changes made in managing the identified risks in a project.

How can residual risks impact project objectives?

Residual risks, even if they are identified and accepted, can still impact project objectives by causing delays, increasing costs or reducing the quality of the project’s output, if they occur.

How can secondary risks affect project objectives?

Secondary risks may affect project objectives if they are not adequately identified and managed. They can result in unplanned changes, issues, or even the initiation of new risks, leading to project delays or cost overages.

How can one minimize the impact of residual and secondary risks on project objectives?

Regular risk assessments and reviews must be carried out throughout the project life cycle, which would help in identifying and managing these risks early. Proper risk responses should also be planned for these risks, to minimize their potential impact.

What is the difference between a residual risk and a secondary risk?

A residual risk is what remains from the original risk after all risk response activities have been conducted, whereas a secondary risk arises as a direct result of implementing a risk response.

How does risk management help in handling residual and secondary risks in a project?

Risk management helps in identifying, assessing, and controlling both residual and secondary risks. It allows project teams to formulate appropriate risk responses, which can help to prevent or reduce the impact of these risks on the project objectives.

What role does monitoring and controlling play in managing residual and secondary risks?

Monitoring and controlling helps in identifying any changes to residual and secondary risks, assess their potential impact, and ensure that proper risk responses are implemented. It encourages the proactive management of these risks, which can reduce their impact on the project objectives.

What is the role of a risk register in managing residual and secondary risks?

The risk register plays a critical role in managing residual and secondary risks as it documents all the identified risks, their risk responses, and the accountable persons. This aids in monitoring and controlling these risks throughout the project.

How are residual risks and secondary risks related to risk appetite?

The acceptance of residual and secondary risks depends on the risk appetite of the organization. An organization with high-risk appetite might accept higher levels of residual risks, whereas one with a low-risk appetite might require more rigorous actions to manage secondary risks.

Why is communication crucial in managing residual and secondary risks?

Communication is crucial because it ensures that all project stakeholders are aware of the existing residual and secondary risks, their potential impact, and the mitigation plans in place. It facilitates proactive management and helps prevent unwanted surprises related to these risks.

What is the benefit of conducting a risk reassessment on the residual and secondary risks?

Conducting a risk reassessment allows project teams to consider changes in project context, reassess the impact and probability of residual and secondary risks, and adjust risk responses if required. This can enhance the management of these risks and their impact on project objectives.

How does risk transference affect residual and secondary risks?

Risk transference moves the responsibility for a risk to another party, but it doesn’t eliminate the risk. For residual and secondary risks, transference might limit their impact on the project, but it won’t remove the risk entirely.

How is the prioritization of residual and secondary risks important?

Prioritizing residual and secondary risks allows the project manager to focus on managing risks that can potentially have the greatest impact on the project objectives.

What is the significance of risk tolerance in dealing with residual and secondary risks?

Risk tolerance defines the level of risk the project or the organization is willing to accept. For residual and secondary risks, understanding risk tolerance can guide the development and implementation of risk responses. If the risk is above the accepted tolerance level, then further action might be needed to reduce the risk.