How do you respond to high-impact risks? (2024)

FAQs

How do you respond to high-impact risks? ›

You can choose from four risk response strategies: avoid, transfer, mitigate, or accept. Avoidance means changing your project plan or scope to eliminate the risk or its cause. Transfer means shifting the risk or its consequences to a third party, such as an insurance company, a contractor, or a supplier.

There are four main risk response strategies to deal with identified risks: avoiding, transferring, mitigating, and accepting. Each strategy has its own pros and cons depending on the nature, probability, and impact of the risk.

Schaumburg, IL, USA – Risk managers deal with multiple levels of complexity in a constantly changing threat landscape. There are typically five common responses to risk: avoid, share/transfer, mitigate, accept and increase.

This is known as a positive risk response strategy. The four main strategies used in positive risk response strategy are exploiting, enhancing, sharing, and acceptance. In other cases, a risk that is a threat must simply be mitigated or minimized.

Since project managers and risk practitioners are used to the four common risk response strategies (for threats) of avoid, transfer, mitigate and accept, it seems sensible to build on these as a foundation for developing strategies appropriate for responding to identified opportunities.

The PMBOK Guide's five negative risk response strategies – avoid, mitigate, transfer, escalate, and accept – offer a comprehensive approach to managing project risks.

Therefore, unless you're avoiding the risk altogether, you are using a combination of the reduce (mitigate), transfer, and/or accept risk response strategy by default.

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 responsability for each agreed risk response.

Escalate Risk

Risk elevation is used when a risk needs to be addressed by an authority beyond the project team. If, for example, a potential customer asks for a one-time discount, the positive risk of gaining the business may be escalated to the company owner to decide if the sale is worth it.

What is the best way to respond to risk and align it within acceptable limits? ›

Based on your risk tolerance and risk exposure, you can choose the most suitable risk response strategy for each risk. There are four main types of risk response strategies: avoid, transfer, mitigate, or accept.

Step 1: Identifying Risks

The first step of the risk management process is to identify all the potential risks your organization might be exposed to. There are different types of risks such as market risks, environmental risks, and more.

A risk response matrix contains

The risk event - The event which is being planned for or responded to. The planned response - The response to this risk, whether it's a corrective action or mitigating action. Contingency plan - A contingency plan for the risk, so that the outcomes of the incident or risk event is ...

To begin creating a risk response strategy, identify and quantify potential risks in each project. Calculate the probability of their occurrence and the impact they may have on the project. In doing so, you'll outline the severity of the potential risks and determine what is manageable and what must be avoided.

The Risk-Response Matrix is a 2×2 matrix used to evaluate and manage risks in a business. It is used to identify and prioritize risks based on their likelihood and potential impact. The matrix helps businesses identify which risks should be addressed first and which risks can be accepted or ignored.

Avoid–This strategy is appropriate for high-probability, high-impact risks. It may involve the following in order to reduce the probability of occurrence to zero: changing some aspect of the project management plan. changing the objective that is in jeopardy or reducing scope.

High impact/low probability – Risks in the bottom right corner are of high importance if they do occur, but they're very unlikely to happen. For these, however, you should do what you can to reduce the impact they'll have if they do occur, and you should have contingency plans in place just in case they do.

Risk mitigation is a strategy to prepare for and lessen the effects of threats faced by a business. Comparable to risk reduction, risk mitigation takes steps to reduce the negative effects of threats and disasters on business continuity (BC).

Mitigate – act to reduce the probability of occurrence or the impact of the risk. An example of this is choosing a different supplier. Accept – acknowledge the risk, but do not take any action unless the risk occurs.