As shown in Figure 7.1, the next step in the identify phase is concerned with responses. This step involves searching for and classifying primary responses for each primary source identified earlier, in the process documenting, verifying, assessing, and reporting what is involved.
Often the identification of a possible response to a particular source is a simple task. Once a source has been identified it is frequently obvious how one could respond. However, the most easily identified possible response may not be the most effective or the most risk efficient response; other responses may be worth identifying and considering. Where an issue is particularly significant, a systematic examination of a range of possible responses, perhaps with a view to applying several responses in parallel, may be worthwhile. There are nine types of response that can be considered, as shown in Table 7.3.
A key response option is to modify objectives, as noted earlier. For example, as a proactive response, the time allowed to complete a decommissioning task may be extended before a contract for the work is let because an assessment of the base plan shows that the initial target would be virtually impossible to meet. As a reactive response, certain performance targets may be relaxed during the execution and termination phases of the PLC, if difficulties in meeting original targets become insuperable or the value of achieving the original targets is reassessed. Setting different levels of cost, time, or quality objectives can have varying effects on the achievement of other objectives. These effects depend on a variety of situational factors, not least of which are the nature of the project and the behaviour of the contractors and professionals employed. For example, good-quality building work is fostered by allowing contractors time to analyse and properly price what is required, and to conduct the work without excessive
Table 7.3—Generic response types types of response method of handling uncertainty modify objectives reduce or raise performance targets, changing trade-offs between multiple objectives avoid plan to avoid specified sources of uncertainty influence probability change the probability of potential outcomes modify consequences modify the consequences if an event occurs develop contingency plans set aside resources to provide a reactive ability to cope keep options open delay choices and commitment, choose versatile options monitor collect and update data about probabilities of occurrence, anticipated effects, and additional sources of uncertainty accept accept uncertainty, but do nothing about it remain unaware ignore uncertainty and take no action to identify (or manage) it haste and paring of costs. In setting goals for attainment on each project objective, trade-offs must be made between levels of attainment on each objective. Unfortunately, deciding trade-offs is often complicated by uncertainty about the nature of the interdependencies between the different performance objectives. Thus, a decrease in the time available to complete a project can cause an increase in total project cost, but it may cause a decrease. Similarly, improvements in quality can mean an increase or a decrease in project time associated with an increase or a decrease in project cost.
In the face of these difficulties, a pragmatic approach is common. Trade-offs may be expressed simply in terms of one objective having clear priority over another. Alternatively, project objectives are often expressed in terms of satisfying target levels of achievement that are assumed to be mutually compatible. This typically results in a series of ad hoc trade-offs being made through the life of the project. For example, in a construction project, the client's representative on the building site might accept work of lower performance than specified in the contract where specifications appear excessively tight, in exchange for work of higher performance in other areas, to secure an overall balance in the terms of exchange.
A second response—avoid—is often a feasible and desirable response to uncertainty. However, risk management strategies formulated as avoidance options in practice may operate only as influence or modify options. This may still be useful, but the residual uncertainty should be recognized. In a multiparty context, transferring uncertainty to another party may be perceived by the transferring party to be an obvious and natural way of avoiding one or more sources of uncertainty. However, uncertainty may not be eliminated for the transferor unless the party receiving the uncertainty adopts appropriate risk management strategies, and the consequences may include secondary sources that fall on the transferor. This is a particularly significant issue in contractual relationships, often with profound implications for risk management and project performance. This issue is examined in more detail in Chapters 9 and 16.
A third response option is influence probability. This is a very common type of response that typically has the intention of reducing the probability of adverse events occurring. Viewing risk management as opportunity management involves increasing the probability of desirable events occurring. In terms of sources of uncertainty more generally, this response involves changing the probability of the various potential outcomes.
A fourth response option is modify consequences. This involves modifying the potential consequences of a source on project performance. It certainly includes reducing adverse impacts (e.g., reducing delays likely to be caused should a particular event occur). However, modification may also involve modifying potential consequences by changing their nature, perhaps by transforming an impact on one performance criterion into an impact on another criterion. For example, if an event occurs that will delay the project, it may be possible to counter this by paying for overtime work or other additional resources.
A fifth type of response option is to develop contingency plans. This involves consciously accepting uncertainty but setting aside resources to provide a reactive capability to cope with adverse impacts if they eventuate. Thus the project manager may set aside a contingency reserve of physical resources, finance, or time in case of need. Risk analysis may be useful to determine the appropriate level of contingency provision.
A sixth type of response—keep options open—involves deliberate delaying decsions, limiting early commitment, or actively searching out versatile project strategies that will perform acceptably under a variety of possible future conditions.
Monitor, a seventh type of response, implies a willingness to undertake more active risk management at some point, but the criteria for active management intervention may not be clearly articulated. Delaying risk management is always an option. Uncertainty may decrease (or increase), associated risk may change, and the need for real-time problem solving may increase or decrease. Adopting this response ought to involve conscious assessment of the likely costs and benefits of delaying more active responses.
Accept, with recognition of the risk exposure, but with no further action to manage or monitor associated uncertainty, is an eighth type of response.
In an important practical sense the final response option is to remain unaware that uncertainty exists. This is a sensible option in cases where threats and opportunities can be dealt with effectively and efficiently as and when they arise. It has obvious dangers in other cases. Remaining unaware is the default option if none of the other options in Table 7.3 are pursued.
The scope for complex source-response management is clearly considerable. Example 7.6 provides an extension to Example 7.1 to clarify part of what is involved. Example 7.7 illustrates some further issues, complementing Example 7.6.
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