Risk Response Strategy

Plan Risk Response – the process of developing options and actions to enhance or exploit opportunities and to reduce or eliminate threats to project objectives. 

Risk Response planning must be appropriate to: Severity of the risk,Cost in meeting the challenge,Timely to be successful, Realistic, Agreed by all parties,Owned by responsible person.

 Strategies for Negative Risks and Threads:

1. Avoid (Avoidance):  The focus of this strategy is to eliminate the cause of the risks. Taking the action to ensure the risk does not occur. This often accomplished by removing people and/or activities.
2. Transfer (Transference): This responses transfers accountability and responsibility of a risk to a third party. The third party actually performs the work or takes accountability. There is normally a cost incurred when using the transfer or transference response. A prime example of transference is the purchase of insurance
3. Mitigate (Mitigation): This response take actions to reduce the probability of risk occurring, or the impact of risk if it occurs. This could be thought of as developing a Plan B. An example is training. We try to reduce the probability and impact of employees performing poorly on the job training them.
4. Accept (Acceptance). This response entails taking no immediate action until the risk occurs. There are two types of acceptance strategies listed below. One is passive and the other is active.

• Acceptance is a response strategy appropriate for BOTH negative and positive risks
• A contingency Plan or Fallback Plan may be developed for a risk you plan to accept. However, the response will not be initiated until the risk occurs
• Acceptance is often the only choice when risks are generated from external sources, or when risk responses are beyond the control of the Project Manager
• Passive Acceptance: This type of acceptance occurs when no Contingency Plans are created to address the risk.
• Active Acceptance: Develop Contingency Plans to address the risk when it occurs. Active Acceptance is a solid option when necessary to convince risk averse stakeholders that a response plan for accepted risks is in place

Strategies for Positive Risks and Opportunities:

1. Exploit (Exploitation): This is a response that takes action to make a cause occur. Steps are taken to ensure the risk happens. It may require additional time or resources to use the exploit response method. This is the opposite of the avoid response.
2. Share (Sharing): This response enlist the support of a third party to take advantage of the opportunities presented by a positive risk event. Partnering with a third party allows both parties to share in the benefits. This is the opposite of the transfer response. Teaming agreements are an example of a share response.
3. Enhance (Enhancing): This response aims to increase the probability of the risk occurring or the impact of a risk if it occurs. Incentives are a common example of an enhance response. This is the opposite of the mitigate response
4. Accept (Acceptance): Acceptance is a feasible risk response for both negative and positive risks.

 References:

1. Project Management Institute. "Project Management Body of Knowledge (PMBOK), fourth edition, 2008".
2. Daniel C. Yeomans, PMI-RMP, PMI-PMP, CMQ/QE. "Passing the Risk Management Professional (PMI-RMP) Certification Exam, The First Try"".

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Project Risk Management

Risk Management is something that we always do even without thinking about it. Risk management involves minimizing the consequences of adverse events as well as maximizing the results of positive events. Therefore, risks can be good or bad events which are commonly called as opportunities or threads.

Risk management is a part of the project management process, and consistently following that process is important for getting results. It allows you to take control of the project, rather than letting the project control you. 

The six processes in Risk Management based on PMBOK Guide is designed to help manage end-to-end project risk. An acronym was developed to remember the steps in this process is PIER-C, Plan, Identify, Evaluate, Respond, and Control.

Risk Definition

Project risk is defined as "An uncertain event or condition that, if it occurs, has a positive or negative effect on at least one of the project's objectives" Project objectives are defined as scope, time, cost, and quality.

The PMI Risk Management Process: PIER-C

PMI developed an interrelated six (6) step approach to manage project risk.The PIER process activities or steps occur during Project Planning Process Group. The Monitor and Control Risks activity occurs during the Project Monitoring and Controlling Process Group, this is the C.

 

1.  Plan Risk Management:  This initial step defines how risk management will be accomplished (methodology). The ultimate goal is to develop a Risk Management Plan which describes how the entire end-to-end Risk Management Process will work.
2. Identify Risks: This steps requires you to develop a list of risk by project, activity, work package, etc. During this step, you define the risk, assign initial ownership, define risk causes, develop initial responses, and categorize each risk. The key output of identify risks is a document referred to as the Risk Register.
3. Perform Qualitative Risk Analysis: This step is the first evaluation step. This is subjective process. During this step, you use the Risk Register to classify risks by probability (likelihood the risk will occur) and impact (effect of the risk consequence on the project). At the end of this step, prioritize all risks and establish a short list of risks that must be aggressively managed. This is often referred to as the Urgent List. You also place low probability and impact risks in a separate section of the Risk Register, which is called Watch List. At the conclusion of this step is the risk register updated.
4. Perform Quantitative Risk Analysis: This step is optional. The Project Manager decides ! You may or may not Perform Quantitative Risk Analysis. This decision is determined by factors such as time, project priority, level of effort as compared to benefits, etc. This evaluation method numerically analyzes the impact of multiple risks to the project. This is an objective method that helps determine probability that stated budgetary and schedule outcomes can be met. The risk register updated is the output of this step.
5. Plan Risk Responses: During this step, develop responses to risks on the urgent or "short"list of risks. The level of response detail is dictated by the priority of the risk. Strive for the responses that address both positive risks (opportunities) and negative risks (threats). The risk register updated is the output of this step as well. In addition, contractual agreements may be developed to support responses that require third party involvement.
6.  Monitor and Control Risk: This is the final step in the Risk Management Process. During this step, monitor and reassess risks on the Risk Register. Implement risk responses as necessary. Identify new or emergent risks that were not identified during the identify risks activity. In addition, evaluate the effectiveness of the risk program for the overall project. 

When to Start Risk Management
PMBOK has nine knowledge areas. Risk management comes at the end of the project planning stage, because, for risk management, you need input from other knowledge areas. The only knowledge area that is planned after risk management is procurement management, because you often need to include causes to manage specific risks in your project. This only becomes clear after risk response planning. For example, you decide the contractor should be responsible for risks that may occur due to expected new legislations, then this must be spelled out in the agreement with the contractor.

Knowledge Area	Contribution to Risk Management
Scope Management	What is included in the project and what is not
Time Management	Work breakdown structure and schedule baseline
Cost Management	Cost baseline and budgeting
Quality Management	Quality standards and specification required for the project
Human Resource Management	Organizational chart, project team members, staff availability, etc
Communication Management	Know the stakeholders and their expectations, and the communication plan

References:

1. Abdulla J. Alkuwaiti, RMP, PMP. "Study Guide for the PMI. RIsk Management Professional Exam".
2. Daniel C. Yeomans, PMI-RMP, PMI-PMP, CMQ/QE. "Passing the Risk Management Professional (PMI-RMP) Certification Exam, The First Try"".
3. Rita Mulcahy, PMP. "Risk Management. Tricks of the trade for Project Managers and PMI-RMP Exam Prep Guide".

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Project Human Resource Management

There are number of pertinent topics in Project Human Resources that are very important to memorize and understand if you want to take either PMP or PMI-RMP (Project Management Institute - Risk Management Professional) exam.

They include:

• Motivational Theories 
• Leadership Style
• Leadership Style Applicability
• Negotiation Methods

A. MOTIVATIONAL THEORIES

Motivation impact stakeholder attitudes. Be aware of the following motivational theories and the individuals who responsible for each when applicable

 

MOTIVATIONAL THEORY	KEY POINTS
Expectancy Theory	Employees believe effort leads to performance. Performance should be rewarded based on individual expectations. Rewards promote further productivity
McGregor's Theory X and Y	All workers fit into 1 of 2 groups.  Theory X, managers believe people are not to be trusted and must be watched. Theory Y, managers believe people should be trusted, want to achieve success, and are self-directed
Maslow's Hierarchy of Needs Theory	Maslow stated that motivation occurs in a hierarchical manner. Each level must be attained before moving to the next (Physiological - Safety - Social - Esteem - Self Actualization)
Achievement Motivation Theory	David McClelland states that there are three needs that must be met for people to be satisfied. They include achievement, affiliation, and power.
Hertzberg' Theory	There are hygiene factors and motivating agents. Hygiene factors such as salary, working conditions, benefits, etc. They do not increase motivation. Motivating factors such as responsibility, growth, and achievement are those that increase motivation.

B. LEADERSHIP STYLES

Leadership styles also impact stakeholder support of the Risk Management Process. Each style must be used on a situational basis.

LEADERSHIP STYLE	DEFINITION
Directive	Tell people what to do
Facilitative	Coordinate and solicit the input of others. A good Project Manager is facilitative
Coaching	Train and instruct others on how to perform the work
Supporting	Provide assistance and support as needed to achieve project goals
Consensus Building	Solve problems based on group input. Strive for decision buy in and agreement
Consultative	Invite others to provide input and ideas
Autocratic	Make decisions without input from others

Tuckman Model: is a common five-step model used to depict growth of a team from the moment it is formed. This model is used to determine appropriate situation leadership style

STAGE	CHARACTERISTICS
Forming	Team meets and learns about the project. Roles are discussed. Expect hesitancy, confusion, anxiety, lack of purpose, and lack of identity. Productivity is low
Storming	Team begins to address work, technical decisions, and project management approaches. Conflict can occur which may disrupt the team. Leadership is challenged, cliques form, etc. Productivity decreases
Norming	Team members begin to work together. They adjust individual habits to accommodate the team. There is open communication, purpose, confidence, motivation, etc. Productivity improves
Performing	Teams are independent, self-directed, and work through issues quickly and smoothly. There is pride and trust. Productivity peaks
Adjourning	Team completes all work and moves on

C. LEADERSHIP STYLE APPLICABILITY

Each leadership style can be used to support a variety of situations. The table shows common situations and recommended leadership

SITUATION	BEST LEADERSHIP STYLE
Team is forming and new. They need direction and task oriented information	Directive; Coaching
Team is storming. There is much conflict, frustration, and confusion	Facilitative; Consensus Building; Consultative
A decision must be made quickly. Time is of the essence. There is little time for input	Autocratic
The team is well established and skilled. They are in the norm or perform stages	Supporting

D. NEGOTIATION

There are some tips to negotiate with stakeholders:

• Understand and be able to explain the needs of the project. Be able to specifically spell out "what, why, who, where, when, and how factors" impacting project risk
• Be able to explain the business need for the project in an effort to gain support. The Functional Manager may not recognize project risks, benefits, etc
• Understand that key stakeholders have other jobs to do. Understand their work situations. Be realistic
• Build a relationship. Find out how to assist the stakeholder and create a win-win situation surrounding the need for their support
• Be willing to compromise. Be flexible

References:

1. PMBOK fourth edition 2008, Project Management Institute
2. Passing the Risk Management Professional (PMI-RMP) CertificationExam. The First Time 2011. Daniel C. Yeomans, PMI-RMP, PMP, CMQ/OE

 

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