Risk Management

Risks can happen to anyone and anything and any time, and business or projects are no exception. Sometimes we could anticipate a risk but many times it could come as a shocker. Risks can be categorized as “Threats” and “Opportunities” based on how it impacts us and how we are going to deal with it. We should also evaluate the probability of occurring and the impact or severity it causes. The quicker we respond to risks will help us to manage it the best way.

To deal with a risk efficiently we should know the type of risk, whether it is negative and may pose a threat to our business, or a risk which bring benefits and offer positive opportunities for us. Regardless of the risk we face, it's important to handle threats and opportunities in an effective manner. Let is see how to respond to risk in an effective way, how to respond to an opportunity, and how to effectively use contingency response strategies.

Elements of Risk Management Process

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Mr. Aleck Jonder

Escalate
Escalation is appropriate when the project team or the project sponsor agrees that a threat is outside the scope of the project or that the proposed response would exceed the project manager’s authority.

Avoid
Risk avoidance is when the project team acts to eliminate the threat or protect the project from its impact. It may be appropriate for high-priority threats with a high probability of occurrence and a large negative impact.

Transfer
Transfer involves shifting ownership of a threat to a third party to manage the risk and to bear the impact if the threat occurs.

Mitigate
In risk mitigation, action is taken to reduce the probability of occurrence and/or impact of a threat. Early mitigation action is often more effective than trying to repair the damage after the threat has occurred.

Accept
Risk acceptance acknowledges the existence of a threat, but no proactive action is taken. This strategy may be appropriate for low-priority threats, and it may also be adopted where it is not possible or cost-effective to address a threat in any other way.

Escalate
This risk response strategy is appropriate when the project team or the project sponsor agrees that an opportunity is outside the scope of the project or that the proposed response would exceed the project manager’s authority

Exploit
The exploit strategy may be selected for high-priority opportunities where the organization wants to ensure that the opportunity is realized.

Share
Sharing involves transferring ownership of an opportunity to a third party so that it shares some of the benefit if the opportunity occurs. It is important to select the new owner of a shared opportunity carefully so they are best able to capture the opportunity for the benefit of the project.

Enhance
The enhance strategy is used to increase the probability and/or impact of an opportunity. Early enhancement action is often more effective than trying to improve the benefit after the opportunity has occurred.

Accept
Accepting an opportunity acknowledges its existence but no proactive action is taken. This strategy may be appropriate for low-priority opportunities, and it may also be adopted where it is not possible or cost-effective to address an opportunity in any other way.