Project Risk Responses & Planning

Determining and Planning Project Risk Responses

• Risk management steps (identification, analysis, response) are integrated and iterative, not sequential.
• Teams analyze risks and find response options during evaluation.
• Assessing cost/schedule risks requires understanding individual risks.
• Risk responses are iterative and drive project planning.
• The final risk assessment differs greatly from the initial one
• Risk responses aim to increase the chances of project success while staying within constraints.
• Responses should balance risk-taking with avoidance and align with project goals.

Planning Risk Responses

• Risk severity ratings help determine which risks need responses.
• General strategies exist for both threats and opportunities
• Each strategy needs resources (time, people, budget).
• If resources are lacking, prioritization is needed.

Balancing Risk Tolerance, Response Costs, and Project Objectives

• Project plan approvals need stakeholder understanding of project objectives (costs, scope, schedule, quality, risk).
• Project managers iterate the plan until balance is achieved.
• Plan of Record (POR) commitments are assessed against risks.
• Organizations have a risk tolerance threshold versus project cost/schedule reserves.
• Different approaches to balance risk: bottom-up (qualitative), holistic (quantitative), or combination.

Bottom-Up Project Risk Balancing

• Overall budget/schedule should include resources for: executing scope, contingencies for major risks, resources for unknown risks
• Project risks should stay within the organization's risk threshold.
• Inclusion of items with contingency/residual risk set-asides and those acceptable for a watch list.

Holistic Project Risk Balancing

• Overall project risk assessment determines the balance between risks and project goals.
• It utilizes register data but allocation of budget for risk responses is avoided.
• Risk tolerance is established as a probability of meeting overall project cost and schedule objectives

Combination of Bottom-Up and Holistic Project Risk Balancing

• With individual project risk matrix with assessment (modeling and simulation) results are compared.
• Differences arise from mismatched assumptions.
• Bridging differences improves the project plan for a valid balance.

Risk (Threats) and Opportunity Response Options

• Four response types for threats and four for opportunities with counterparts.
• Understanding response options helps in planning, monitoring, and controlling risks.

Risk(Threat) Response Options

• Project teams address risks during planning, formally or informally.
• Risk register inputs can be constructed during planning.
• Risk identification takes place after the plan is created.
• A schedule and cost roll-up is available when the risk evaluation team starts.
• Schedule and cost estimates are available, and cost reserves and schedule buffers are sometimes known.
• By the time the POR plan is set, teams take actions such as avoidance, transfer, mitigation, or acceptance.
• The risk register will only include risks planned to be mitigated, transferred, or accepted.
• Avoidance actions will have already been implemented, and will show up as closed risks on the register.
• Tracking of closed risks is good practice

"Avoid" Risk (Threat) Response Strategy

• Project risks can be avoided completely.
• Risk can be avoided (eliminated) if the plan is changed to use old technology
• If a difficult requirement is avoided by removing or adjusting it.
• Responses are incorporated when agreed to by stakeholders.
• Avoiding risk (a risk is accepted) includes the intent of making future changes to avoid risking a priority.
• This is a priority protection strategy.
• Risk avoidance strategies can create secondary risks.
• In avoidance cases, probability is reduced to zero or potential impact is removed.

"Transfer" Risk (Threat) Response Strategy

• Involves shifting risk impact to a third party who controls the risk source.
• The third party has authority, resources, experience, and willingness to meet commitments.
• Transferring risk involves contracting or partnering with a specialist.
• Involves potentially purchasing insurance
• Transfer strategies might create secondary risks (e.g., late delivery)
• Agreements with incentives/penalties enable more removal of secondary risks
• The project risk register should adequately document all planned risk transfer strategies, assess the level of risk, and resulting secondary risk assessments.

"Mitigate" Risk (Threat) Response Strategy

• Actions are formulated and put in place to bring down the occurence, or impact to the project.
• There is residual risk with responses, and the residual risks are low enough to accept.
• A contingency reserve might address unknown residual risks that may be outside the acceptable range.
• Risk mitigation can bring rise to one or more secondary risks.
• Mitigation strategies include redundancy, multiple approaches, additional design cycle, expedited part delivery, rigorous contract terms, easier customer terms, high-risk tests, more resources, cross-functional coordination.

"Accept" Risk (Threat) Response Strategy

• Simply accept risk (take no action).
• Implemented in a way to ensure that all stakeholders are aware and in agreement.
• Keep a watch list in part of the risk register.
• Occurs when risks in the low-risk zone of a risk matrix, because they can be easily eliminated or mitigated with little additional resources.
• Accepting a risk and also having a contingency reserve (additional budget and schedule buffer) will deal with any issues
• It is appropriate when new technology may result in any number of unknown risks, and so risk is accepted.

Opportunity Response Options

• Opportunities should be taken seriously
• Can give significant savings, adding to project reserves or objectives

"Exploit" Opportunity Response Strategy

• Opportunities are identified and acted upon during planning.
• Ensures that a project is benefited if not already being proactively acted upon.
• Assignment of more resources to ensure reciept of incentivce payment
• Opting to use a new manufacturing technology to reduce time and costs
• Decision to decide prior design to avoid having the new hardware, softwarecode manufacturing process
• Involves leaning development process (co-locating team or developing “skunk-work” type of environment
• Typically implemented and not on register

"Share" Opportunity Response Strategy

• Requires interaction with a third-party organisation.
• An organisation may be able to enhance or exploit an opportunity with collaboration
• Both parties apply unique abilities
• Can be implemented with a third party via a teaming agreement, joint venture, or strategic partnership
• Sharing opportunity responses established up front durin project planning in a closed register

"Enhance" Opportunity Response Strategy

• Enhancing an opportunity is akin to mitigating a risk (threat).
• Formed and put in place to either raise the likelihood of occuring, raising the level of the project
• Question asked is increase materialization
• Examples include: action taking to potentially finish early, outsourcing some of the manufaturing, improve reduction costs
• Negotiation product requiremetn changes

"Accept" Opportunity Response Strategy

• Opportunities are too low to extend
• Team is to track
• Team will see where they turn into benefits
• Reducing the number of designs to help save time or ultria conservative estimatin

Conceurrent Risk (Threat) and Opportunity Response Strategies

• The team might estimate too many resources to avoid risk
• A risk transfer enables a shared resposne and opporunitiy
• Exploiting tool in CAD can help deisgn an opportunity when the project is perceived ot extst

Practical Q's For Determining Risk Responses

• Very difficult to assemble a risk team
• Ensure that team members are provided with a preview data package
• It is imporatnt to ensure negtive impacts and benefits dont impact projects
• Determine if there a way that can maintain a particular indvidaul risk, while staying cost-effecitve
• Are they any tools that can benefit the projecyt

Technical Risks, Threats, Opportunities

• Determine the likelihood for determining the likleyhood
• Is there any product requiresmtns
• What requriemnts can drive the csts and shcedule the most

Schedules Risks and Oppotunites

• Reqsonses can impact cost
• Opoortunites may ensure successful exeuction
• Is there an alterntaive in consideration

Proejct Cost Risks (Threatns) and Opootnuites

• Potenital to impact the added costs associated
• Questions to consider for responses: is there an ay to shorten the schdul and save on army marching expensess
• can eliminate softer porudct requriments
• save money by contracting, more cpalble resources
• Clear undestanind of relative compelete
• Reduce waste or noan vlaue work

Conclusion

• Know the options to effectively and mange risks, threarts, and oppotunties
• The questions assist in develooping sand and balenced plans