CHAPTER V:

RISK RESPONSE
RISK RESPONSE
PLANNING?
Risk response planning is the process of developing options and
determining actions to enhance opportunities and reduce threats to the
project's objectives. It includes the identification and assignment of
individuals or parties to take responsibility for each agreed risk response.
This process ensures that identified risks are properly addressed. The
effectiveness of response planning will directly determine whether risk
increases or decreases for the project.

Risk response planning must be appropriate to the severity of the risk,

cost effective in meeting the challenge, timely to be successful, realistic
within the project context, agreed upon by all parties involved, and owned
by a responsible person. Selecting the best risk response from several
options is often required
01
RISK
RESPONSE
PLANNING
RISK RESPONSE PLANNING
A. INPUTS FOR RISK RESPONSE PLANNING
1. Risk Management Plan. This is the part that the plan is described
2. List of prioritized risks. This list from qualitative risk analysis is described
3. Risk ranking of the project. Contains list of items that classified as risk and items are being rated by the
member of the team.
4. Prioritized list of quantified risks. This list from quantitative risk analysis using the major metric of risk
management.
5. Probabilistic analysis of the project. Forecasts of potential project schedule and cost results listing the
possible completion dates or project duration and costs with their associated confidence levels.
6. Probability of achieving the cost and time objectives. The probability of achieving the project objectives
under the current plan and with the current knowledge of the risks facing the project can be estimated
using quantitative risk.
7. List of potential responses. In the risk identification process, actions may be identified that respond to
individual risks or categories of risks.
8. Risk thresholds. The level of risk that is acceptable to the organization will influence risk response
planning
9. Risk owners. A list of project stakeholders able to act as owners of risk responses. Risk owners should
be involved in developing the risk responses.
10. Common risk causes. Several risks may be driven by a common cause. This situation may reveal
opportunities to mitigate two or more project risks with one generic response.
11. Trends in qualitative and quantitative risk analysis results. Trends in results can make risk response or
further analysis more or less urgent and important.
B. Tools and Techniques for Risk Response Planning
Several risk response strategies are available. The strategy that is most likely to be effective should be selected for each
risk. Then, specific actions should be developed to implement that strategy. Primary and backup strategies may be
selected.

AVOIDANCE
Risk avoidance is changing the project plan to eliminate the risk or condition or to protect the project objectives from its
impact. Although the project team can never eliminate all risk events, some specific risks may be avoided.
Some risk events that arise early in the project can be dealt with by clarifying requirements, obtaining information, improving
communication, or acquiring expertise. Reducing scope to avoid high-risk activities, adding resources or time, adopting a
familiar approach instead of an innovative one, or avoiding an unfamiliar subcontractor may be examples of avoidance.

TRANSFERENCE
Risk transfer is seeking to shift the consequence of a risk to a third party together with ownership of the response.
Transferring the risk simply gives another party responsibility for its management; it does not eliminate it.
Transferring liability for risk is most effective in dealing with financial risk exposure. Risk transfer nearly always involves
payment of a risk premium to the party taking on the risk. It includes the use of insurance, performance bonds, warranties,
and guarantees. Contracts may be used to transfer liability for specified risks to another party. use of a fixed-price contract
may transfer risk to the seller if the project´s design is stable. Although a cost-reimbursable contract leaves more of the
risk with the customer or sponsor, it may help reduce cost if there are mid-project changes.
B. Tools and Techniques for Risk Response Planning
Several risk response strategies are available. The strategy that is most likely to be effective should be selected for each
risk. Then, specific actions should be developed to implement that strategy. Primary and backup strategies may be
selected.

MITIGATION
Mitigation seeks to reduce the probability and/or consequences of an adverse risk event to an acceptable threshold. Taking
early action to reduce the probability of a risk´s occurring or its impact on the project is more effective than trying to repair the
consequences after it has occurred. Mitigation costs should be appropriate, given the likely probability of the risk and its
consequences.
Risk mitigation may take the form of implementing a new course of action that will reduce the problem—e.g., adopting less
complex processes, conducting more seismic or engineering tests, or choosing a more stable seller. It may involve changing
conditions so that the probability of the risk occurring is reduced—e.g., adding resources or time to the schedule. It may require
prototype development to reduce the risk of scaling up from a bench-scale model.
Where it is not possible to reduce probability, a mitigation response might address the risk impact by targeting linkages that
determine the severity. For example, designing redundancy into a subsystem may reduce the impact that results from a failure of
the original component.

ACCEPTANCE
This technique indicates that the project team has decided not to change the project plan to deal with a risk or is unable to
identify any other suitable response strategy. Active acceptance may include developing a contingency plan to execute, should
a risk occur. Passive acceptance requires no action, leaving the project team to deal with the risks as they occur.
A contingency plan is applied to identified risks that arise during the project. Developing a contingency plan in advance can
greatly reduce the cost of an action should the risk occur. Risk triggers, such as missing intermediate milestones, should be
defined and tracked. A fallback plan is developed if the risk has a high impact, or if the selected strategy may not be fully
effective. This might include allocation of a contingency amount, development of alternative options, or changing project scope.

The most usual risk acceptance response is to establish a contigency allowance, or reserve, including amounts of time,
money, or resources to account for known risks. The allowance should be determined by the impacts, computed at an
acceptable level of risk exposure, for the risks that have been accepted.
C. Outputs from Risk Response Development

A. Risk response plan.

● Identified risks, their descriptions, the area(s) of the project (e.g.,WBS element) affected, their cause, and how they may affect
project objectives.
● Risk owners and assigned responsibilities.
● Results from the qualitative and quantitative risk analysis processes.
● Agreed responses including avoidance, transference, mitigation, or acceptance for each risk in the risk response plan.
● The level of residual risk expected to be remaining after the strategy is implemented.
● Specific actions to implement the chosen response strategy.
● Budget and times for responses.
● Contingency plans and fallback plans

B. Residual Risk
● Residual risks are those that remain after avoidance, transfer, or mitigation responses have been taken. They also include minor
risks that have been accepted and addressed, e.g., by adding contingency amounts to the cost or time allowable.

C. Secondary Risk
● Risks that arise as a direct result of implementing a risk response are termed secondary risks. These should be identified and
responses planned.
C. Outputs from Risk Response Development

D. Contractual agreements
● Contractual agreements may be entered into to specify each party's responsibility for specific risks, should they occur, and for
insurance, services, and other items as appropriate to avoid or mitigate threats.

E. Contingency reserve amounts needed

● The probabilistic analysis of the project and the risk thresholds help the project manager determine the amount of buffer or
contingency needed to reduce the risk of overruns of project objectives to a level acceptable to the organization.

F. Inputs to other processes

● Most responses to risk involved expenditure of additional time, cost, or resources and require changes to the project plan.
Organizations require assurance that spending is justified for the level of risk reduction. Alternative strategies must be fed back
into the appropriate processes in other knowledge areas.

G. Inputs to a revised project plan.

● The results of the response planning process must be incorporated into the project plan, to ensure that agreed actions are
implemented and monitored as part of the ongoing project.
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