Selecting The Appropriate Response Mechanism

Previously we stated that there were four widely accepted risk response methods; assumption, avoidance, control (mitigation), and transfer. Historically, most practitioners argue that the risk response method selected is heavily biased toward the magnitude of the risk and the project manager's tolerance for risk. While this may still be true, there are other factors that influence the risk response method selected, and many of these can be included as part of the project management methodology.

The potential rewards of selecting the appropriate risk response can influence the selection process. Figure 17-11 shows the risk-reward matrix. What is important to recognize in Figure 17-11 is that the risk-reward matrix is actually three-dimensional, with the third axis being the quality, skill level, or capability of resources required. Certain risk response actions, such as assumption, control, and certain aspects of transfer (i.e., warranty), require that resources be consumed. The quality and availability of the resources required can influence the risk response selection process irrespective of the potential rewards. For example, if a company adopts a risk assumption approach on an R&D project, the rewards could be huge if patents are issued and licensing agreements follow. But this assumes available, qualified resources. Without the appropriate resources, the only response mechanisms remaining might be risk avoidance or risk transfer, and in some cases control.

A second factor influencing the risk response method selected is the procedural documentation requirements of the project management methodology. This is illustrated in Figure 17-12. Project management methodologies that are based on policies and procedures are

High

Risk Medium

Project Management Made Easy

Project Management Made Easy

What you need to know about… Project Management Made Easy! Project management consists of more than just a large building project and can encompass small projects as well. No matter what the size of your project, you need to have some sort of project management. How you manage your project has everything to do with its outcome.

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