130 MASTERING RISK AND PROCUREMENT IN PROJECT MANAGEMENT response plans. This proactive approach enables the project manager time to think through responses and, in some cases, identify more than one response where the project manager can use strategy as to the best course of action. Proactive response planning also allows the project manager time to document best responses and assign owner- ship of particular risks to individuals who can carry out the response. This is an efficient way the project manager can oversee risk response, as preapproved responses can be assigned to individuals to be carried out in the occurrence of a risk event and do not require subject matter experts to use a cumbersome, last-minute decision process. Proactive planning in risk responses is truly the best way to manage risk for project activities; it gives the project manager much more control of not only how to respond to risk, but who can assist in risk responses being carried out correctly. Both reactive and proactive response modes are the general condition the project manager and project staff will be in based on pre-project planning. In most cases, the assumption in risk response planning is to address problems that will have a negative effect on work activities and the project. Although in most cases this is true, occasionally an issue can result in a positive outcome that was unex- pected and will also need a response. Projects, then, have the poten- tial of both negative and positive risks. Negative Risks Any influence that has a negative effect on a work activity is con- sidered to be a negative risk and results in problems that will have to be addressed. The project manager and other project staff evaluating work activities for potential risks can generally spot areas that may have a potential for a problem and will need a response plan to address the risk, should it occur. There are four typical strategies the project manager can use in addressing a risk event, which typically would take into consideration the overall risk tolerance of the project and organi- zation as well as options that might be available for response planning and strategy project manager might use in a response that may affect other work activities within the project. 05/20/2020 - RS0000000000000000000002125614 (Shantelle Hildred) - Mastering Risk and Procurement in Project Management CHAPTER 5 • RISK RESPONSE STRATEGIES 131 • Avoid risk— Identify the root cause of a risk event and elimi- nate or alter the conditions of the activity to create a new sce- nario without the potential risk. This is simply eliminating the risk before it happens and should be the best-case action in response to a risk. The caution to the project manager and proj- ect team for eliminating a risk is what actions have to be taken to eliminate or alter a condition and what effects that could have on the output deliverable for that work activity.

1. 130 MASTERING RISK AND PROCUREMENT IN PROJECT
MANAGEMENT
response plans. This proactive approach enables the project
manager
time to think through responses and, in some cases, identify
more
than one response where the project manager can use strategy as
to
the best course of action. Proactive response planning also
allows the
project manager time to document best responses and assign
owner-
ship of particular risks to individuals who can carry out the
response.
This is an efficient way the project manager can oversee risk
response,
as preapproved responses can be assigned to individuals to be
carried
out in the occurrence of a risk event and do not require subject
matter
experts to use a cumbersome, last-minute decision process.
Proactive
planning in risk responses is truly the best way to manage risk
for
project activities; it gives the project manager much more
control of
not only how to respond to risk, but who can assist in risk
responses
being carried out correctly.
Both reactive and proactive response modes are the general

2. condition the project manager and project staff will be in based
on
pre-project planning. In most cases, the assumption in risk
response
planning is to address problems that will have a negative effect
on
work activities and the project. Although in most cases this is
true,
occasionally an issue can result in a positive outcome that was
unex-
pected and will also need a response. Projects, then, have the
poten-
tial of both negative and positive risks.
Negative Risks
Any influence that has a negative effect on a work activity is
con-
sidered to be a negative risk and results in problems that will
have to
be addressed. The project manager and other project staff
evaluating
work activities for potential risks can generally spot areas that
may
have a potential for a problem and will need a response plan to
address
the risk, should it occur. There are four typical strategies the
project
manager can use in addressing a risk event, which typically
would take
into consideration the overall risk tolerance of the project and
organi-
zation as well as options that might be available for response
planning
and strategy project manager might use in a response that may
affect

3. other work activities within the project.
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CHAPTER 5 • RISK RESPONSE STRATEGIES 131
• Avoid risk— Identify the root cause of a risk event and
elimi-
nate or alter the conditions of the activity to create a new sce-
nario without the potential risk. This is simply eliminating the
risk before it happens and should be the best-case action in
response to a risk. The caution to the project manager and proj-
ect team for eliminating a risk is what actions have to be taken
to eliminate or alter a condition and what effects that could
have on the output deliverable for that work activity.
• Reduce risk— Similar to avoidance in altering the
conditions
of a work activity such that although it may not be possible to
completely eliminate the potential risk, it can reduce the impact
or probability of its occurrence. Any action that can be taken to
either reduce or eliminate a risk event should be the first course
of action the project manager takes in planning response.
• Transfer risk— Requires the reassignment of
responsibil-
ity in such a way that the impact of the risk is absorbed by an
alternate party. An example of this would be using an exter-
nal subcontractor for a particular work activity with significant
potential risk items as opposed to using the organization’s inter-
nal resources, thus transferring some or all of the responsibility

4. of identified risks out of house.
• Accept risk— The last course of action the project
manager
should use in planning a response for a potential risk event—
simply accepting the outcome of the risk. There may be some
conditions given a specific work activity where specifications
do
not allow any alteration of the conditions to eliminate, mitigate,
or transfer the impact of a risk event, and the project must bear
the full brunt of the impact. But this response can be accept-
able as a function of risk tolerance if the specific risk event has
minimal potential impact to the success of the project.
Benefits, Trade-Offs, and Pitfalls
The ability to avoid potential problems is the best course of
action, given this has the least amount of impact to an original
plan
for an activity. This is an important factor for the project
manager to
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132 MASTERING RISK AND PROCUREMENT IN PROJECT
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consider when planning risk responses because one of the
primary
responsibilities of the project manager is to complete all project
activ-

5. ities as scheduled and on budget. This being the case, the
project
manager would design risk responses in the best interest of
maintain-
ing the project plan and having no negative influences alter the
course
of that original plan. Avoidance is the only option that has
maximum
benefit with little or no trade-off or pitfall.
If the project manager chooses to use actions that would reduce
risk or transfer risk, this usually is not accomplished without a
trade-
off or pitfall of some kind. The strategy for mitigating or
transferring
of a risk is the cost to benefit ratio and what course of action
would be
available that has the least amount of impact to the budget or
schedule
yet accomplishes the goal of minimizing the impact the risk
event has.
Something as simple as utilizing a claim to an organization’s
insurance
policy to cover a particular problem transfers financial
responsibility
away from the project budget, leaving only residual issues with
quality
and delay in schedule. Contractual stipulations allow the project
man-
ager to transfer liability of a problem to another party, which
opens
the door for benefits, such as the subcontractor having to pay
for dam-
ages, schedule delays, or quality issues.
Although acceptance might be seen as having to bear the full

6. brunt of impact a risk event might have, it should not be seen as
fail-
ure in that consideration must be made as to what level of
impact
the problem actually has. If a problem is unavoidable and there
is no
solution for transferring the risk to another party, having to
accept
the impact of the problem is unavoidable. It may be the only
course
of action. If the problem is a very large problem that may have
severe
impact to schedule, cost, or quality, this can be detrimental to
the
project. In some cases, acceptance might be the best course of
action
if the impact is negligible to the schedule or budget and has
little or
no impact on the quality of the deliverable. Designing an
alternate
response for a minor risk could cost the project more than
simply
accepting the risk impact as is. Regardless of the impact a risk
has,
acceptance always comes at a price because it has an influence
on
cost, schedule, or quality in some way, even minor, that was not
origi-
nally planned.
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7. CHAPTER 5 • RISK RESPONSE STRATEGIES 133
Positive Risks
Any influence that has a positive effect on a work activity is
considered to be a positive risk and an opportunity that should
be
addressed. Just as unplanned problems can affect work
activities,
unplanned opportunities in some cases present themselves
where the
project manager should be prepared with a response. An
opportunity
can manifest itself simply out of a special condition of events.
In some
cases, a problem or risk event, although unfortunate and still
causing
a problem, can also generate an opportunity that would not have
been
otherwise available if the problem had not occurred. Positive
risks
can also influence response plan designs that would give the
project
manager options in how to best utilize the opportunity. There
are four
basic response plans that can be used when an opportunity is
present:
• Exploit— An option where the project manager would
take full
advantage of the opportunity, accepting all benefits that might
be available. He encourages any actions to increase the prob-
ability of this opportunity to maximize the benefit that would be
realized.

8. • Enhance— An option where the response is to promote
fur-
ther actions that would not only increase the probability of its
occurrence, but more importantly increase the impact of the
opportunity. The focus here is to get maximum benefit.
• Share— An option where an opportunity was discovered
by
more than one party and therefore the benefit is also to be
shared by each party. An opportunity might have been discov-
ered by one party and further enhanced by one or more parties
to maximize the benefit shared by all.
• Accept— This is simply acknowledging that the
opportunity
exists and taking advantage of the opportunity if presented,
but not necessarily engaging in activities that would increase its
probability.
5.3 Contingency Response Strategy
If risk identification and response planning is possible at the
beginning of the project, response planning will be designed
around
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134 MASTERING RISK AND PROCUREMENT IN PROJECT
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general forms of risk and only have enough detail to adequately

9. respond to each type of risk. An example would be several work
activi-
ties being performed outdoors. If weather is a problem, the
response
would be to delay activities or rent large outdoor tents to cover
the
activity zone(s), allowing work to continue. There may be cases
where
a much more specific risk was identified and an actual plan that
spe-
cifically states actions will be carried out if certain conditions
are pres-
ent—this is called a contingency response .
By definition, a specially designed response is only carried out
contingent on certain conditions that would warrant specific
actions.
A general response plan would probably be sufficient, but
detailed
information suggests conditions that would warrant a very
specific
response, and this response would be custom-designed for only
one
risk. Project managers can therefore design contingency
responses as
a form of strategy in resolving specific issues to accomplish a
specific
outcome.
Designing contingencies is usually seen in the case where a
work activity has a specialized resource requirement (critical
human
resource, specialized piece of equipment, and so on), and this
activ-
ity is required to take place at a specific time, where the risk
will be

10. high concerning the resource or completing the activity in the
speci-
fied timeframe. With this risk being associated with this one
poten-
tial problem and activity, a contingency or backup plan would
have a
secondary resource in place to ensure the activity is completed
in the
specified timeframe. The project manager may also have
contingency
funds set aside in the budget for this one activity to respond
quickly
if a secondary plan has to be implemented. How the specific
contin-
gency plans are designed can involve a strategy of how internal
versus
external resources are used, contingency budget planning, and
sched-
ule buffers can be evaluated for the best course of action and
the least
impact to the project budget and schedule.
Contractual Response Strategy
Another form of contingency planning and strategy can be seen
in the use of contracts between the organization and
subcontractors,
vendors, and suppliers. Depending on how contracts are written,
05/20/2020 - RS0000000000000000000002125614 (Shantelle
Hildred) - Mastering Risk and Procurement in Project
Management