Risk Response Actions play a crucial role in project risk management, especially when preparing for the PMI Risk Management Professional (PMI-RMP) exam. Understanding how to decide risk response actions in a time-bound manner, based on risk response strategies, and accurately identifying action owners is vital in mitigating any potential risks in a project.
Risk Response Actions
Risk response actions refer to the measures that a project team undertakes to minimize the potential impact of identified risks. These actions are part and parcel of a complete risk management plan and should be directed towards either reducing the potential negative effects of threats or maximizing the potential positive effects of opportunities.
Time-bound Risk Response Actions
Deciding on risk response actions should be a time-bound process. Just as risks are identified and assessed within particular project phases, so too must the mitigation strategies be formulated within the restrictions of the project timeline. The longer a threat is left unaddressed, the greater the potential impact it could have on the project.
For instance, if a risk related to a critical project supplier has been identified, actions like finding alternative sources, increasing stock levels, or modifying project requirements must be set into motion immediately and completed within a defined timeframe to nullify or reduce the prospective harm.
Risk Response Strategies
There are primarily four risk response strategies that aid in deciding action plans depending on whether the risk is a threat or an opportunity.
- Avoid: This strategy involves altering the project plan to eliminate the risk or protect the project objectives from its impact.
- Transfer: This strategy shifts the negativity of the risk to a third party together with ownership of the response.
- Mitigate: This strategy aims to reduce the probability or impact of a risk to an acceptable threshold.
- Accept: This recognizes that the organization will accept the consequences of the risk. Acceptance can be of two types: active (developing contingency plans to execute if the risk occurs) and passive (doing nothing and dealing with the risk if it occurs)
Identifying the Action Owners
For each identified risk and corresponding risk response action, a risk owner is nominated. This individual is responsible for ensuring that the planned risk responses are executed in a timely manner.
For example, if software development delay risk is identified, the project manager might charge the Lead Developer with implementing a mitigation strategy – accelerating recreational activities for the software development team to keep motivation levels high. If an alternate supplier needs to be sourced to address risks in the supply chain, the logistics manager might be deemed the action owner of this risk response.
Conclusion
To wrap up, adopting a comprehensive approach to decide risk response actions in a time-bound manner plays a fundamental role in risk management. Adopting suitable risk response strategies and promptly identifying action owners facilitates quick and effective risk resolution. Applying these principles in the PMI-RMP exam context will not only aid your understanding of the topic but will also demonstrate real-world application and comprehensive knowledge about risk management.
Practice Test
True or False: A risk owner is usually the person who identifies the risk.
- Answer: False.
Explanation: While the person who identifies the risk can be the risk owner, the risk owner is usually someone who can manage or respond to the risk effectively.
True or False: Risk response strategies only include mitigating the risk or avoiding the risk.
- Answer: False.
Explanation: Risk response strategies can include mitigation, avoidance, transference, and acceptance.
Multiple Select: Which of the following can be potential risk owners?
- a. The Project Manager
- b. The Stakeholders
- c. The Client
- d. All of the above
- Answer: d. All of the above.
Explanation: Any individual or group who can potentially manage or effectively respond to the risk can be considered the risk owner.
Single Select: Which risk response strategy involves sharing the impact of a risk with a third party?
- a. Mitigation
- b. Transference
- c. Avoidance
- d. Acceptance
- Answer: b. Transference.
Explanation: Transference is a risk response strategy that involves sharing the impact of a risk with a third party, usually through some form of contractual agreement.
True or False: Once a risk response strategy has been chosen, it cannot be changed later.
- Answer: False.
Explanation: While it’s important to decide on a risk response strategy, it doesn’t mean that it can’t be changed if circumstances change or new information is available.
Multiple Select: Risk response actions can include:
- a. Change Project Scope
- b. Increase Budget
- c. Shorten Schedule
- d. All of the above
- Answer: d. All of the above.
Explanation: Depending on the type and impact of the risk, the risk response actions could include changing the project’s scope, increasing the budget, or shortening the schedule.
True or False: Identifying the risk owner is a one-time task in risk management.
- Answer: False.
Explanation: The identification of risk owners is not a one-time task. It should be reviewed periodically to ensure that the right individuals/groups are managing the associated risks.
Single Select: Which tool helps to decide the risk response actions based on the risk response strategies?
- a. Pareto Chart
- b. Risk Register
- c. Fishbone Diagram
- d. SWOT analysis
- Answer: b. Risk Register.
Explanation: The Risk Register is a project management tool that is used to identify, assess and track the risks associated with a project.
True or False: The risk response strategy must be time-bound.
- Answer: True.
Explanation: Risk response strategies should have clear timelines to ensure that the risk does not materialize or its impact is minimized.
Single Select: which risk response strategy does not deal with the risk at all?
- a. Mitigation
- b. Transference
- c. Avoidance
- d. Acceptance
- Answer: d. Acceptance.
Explanation: The acceptance strategy denotes a decision not to change the project management plan to deal with the risk or is unable to identify any other suitable response strategy.
Interview Questions
What is the purpose of identifying action owners in risk management?
Identifying action owners in risk management provides accountability and ensures that risk responses are properly implemented. Each risk should have a designated person who is responsible for implementing the appropriate response strategy and monitoring the risk.
What are the four main risk response strategies?
The four main risk response strategies according to PMI are: Acceptance (no action is taken), Mitigation (reducing the probability or impact), Transfer (shifting the risk to another party), and Avoidance (eliminating the risk).
Why should risk response actions be time-bound?
Risk response actions need to be time-bound to ensure they are implemented in a timely manner. This helps keep the project on track and prevents risks from causing more damage than necessary.
How can you decide on risk response actions?
Decision on risk response actions is often based on the severity and likelihood of the risk, the cost and benefit of implementing the response, and the overall project objectives and constraints.
What roles does the action owner play in the risk response strategy?
The action owner is responsible for implementing the risk response strategy, monitoring the effectiveness of the response, and updating the risk register.
In what situation would an avoidance risk response strategy be suitable?
Avoidance strategies are best suited for risks with potentially severe consequences and high probability that cannot be satisfactorily mitigated or transferred.
Who is responsible for identifying action owners in the risk management process?
The project manager in collaboration with the project team are typically responsible for identifying action owners in the risk management process.
Can the risk response actions change over the lifecycle of a project?
Yes, risk response actions can change over the lifecycle of a project as new risks may emerge, or existing risks can increase, decrease or become obsolete.
How often should action owners update the risk register?
It’s recommended that action owners update the risk register regularly, especially after major project phases or milestones, or when the risk environment changes significantly.
When does the process of deciding risk response actions end?
The process of deciding risk response actions is an ongoing process and does not end until the project is completed or cancelled.
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