risk handling strategies

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C o n f i d e n t i a l

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Program : MBA

Semester : IV

Subject Code : PM0016Subject Name : Project Risk Management

Unit number : 6

Unit Title : Risk Handling Strategies

Lecture Number : 6

Lecture Title : Risk Handling Strategies

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Objectives :

The objectives of this lecture are to:

Introduce Risk Handling Strategies.

Explain the objectives of risk handling.

Devise risk tracking and risk process implementation.

Compare risk acceptance and risk transfer.

Assess the importance of contingency reserves.

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Unit-6 Risk Handling Strategies

Risk Handling Strategies


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Lecture Outline

Introduction


Risk Handling Strategies Objectives Elements of Risk Handling Strategies

Risk Tracking

Risk Acceptance Risk Mitigation

Risk Transfer

Risk Avoidance

Contingency Reserves

Risk Process Implementation

Risk Documentation

Summary

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Introduction

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Risk handling is the process of risk identification, analysis, and

response.

Risk handling process includes the following:

Identification, assessment and the prioritisation of variousrisks.

Minimising, monitoring, and taking control of the probability

and impact of risks by coordinated application of all the

resources.

This unit familiarises you with various risk handling strategies.


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The risks handling strategies are:


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Risk handling is a critical aspect in achieving basic and

overall objectives of the project.

Risk handling strategies achieve the following objectives:

Perform risk assessments.

Establish risk handling priorities.

Develop risk handling plans.

Monitor the status of risk handling actions.

Implement appropriate risk management strategies.

Raise awareness of risk management.

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Risk Handling Strategies Objectives


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Elements of Risk Handling Strategies

The key elements of risk handling include the following:

Risk function

Identify

Assess

Control

Monitor

Risk policies and governance at board level


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Risk Acceptance

Risk acceptance is an informed decision taken to accept the consequences

and likelihood of a particular risk.

An organisation should manage its risks to balance the opportunities

against the potential losses for the overall improvement of the business.

The quantity of risk that an organisation is able to take is often called as

its 'risk appetite' or 'risk tolerance.

Every organisation can accept a level of risk,

If risk mitigation costs are higher than the probable losses.

If risks require mitigation but itisnot possible.



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Risk mitigation refers to the systematic reduction in the likelihood of

risk occurrence.

It is also called as risk reduction.

Risk mitigation includes the following actions:

Prioritising actions

Evaluating recommended control options

Conducting cost-benefit analysis

Selecting control

Assigning responsibility

Developing a safeguard implementation plan

Implementing selected control(s)

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Risk Mitigation



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Risk transfer is the shifting of responsibility or burden for disaster or

loss, to another party through legislation, contract, insurance or other

means.

A good risk response plan identifies the third party to whom

certain risks can be transferred.

It always make the best casescenario less good, the

worst casescenario less bad.

It displaces the expected monetary value towards lower benefit.

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Risk Transfer



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Risk Avoidance refers to reducing risk to the organisation through bettermanagement information.

Risk Avoidance is a business strategy.

Risk Avoidance is a technique of risk management that involves:

Taking steps against a hazard.

Engaging in alternative activity, or otherwise end aspecific exposure.

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Risk Avoidance



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Contingency reserves refers to the funds or other financial resourcesthat is required to reduce the risk of overruns.

It is used to deal with unknown risks and accepted known risks.

It covers risk events that are not accounted for in the project baselineduration and cost estimations.

The considerations for contingency plan are: Actions

Scope Initiation

Roles and responsibilities

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Contingency Reserves



Risk process implementation is about what ongoing actions shouldbe taken beyond planning.

It focuses on the performance of overall process and its integrationwith the other metrics programs.

Risk process implementation requires:

Clear objectives

Proper planning and resourcing

Effective monitoring and control

Clear success criteria

Risk Process Implementation


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Risk Documentation is an important aspect of risk management.

It has to be done forthe entire risk management process.

It includes data from:

Planning

Assessment

Handling

Monitoring activities

Documentation of risk management activities include creating:

Risk management plan

Risk information form(s)

Risk assessment report

Risk handling priority list

Risk handling plan of action


Risk Documentation

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Summary

Risk handling means risk treatment. The five Risk handling strategies were discussed.

Risk documentation helps to provide guidance to solve any future

problems or risks.

Contingency reserve helps to find out any possible impact of risk that

involves making a contingency plan to reduce the impact.

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Check Your Learning

1. Define Risk Transfer.

Ans. Risk transfer can be defined as shifting the responsibility or burden

for disaster or loss to another party through legislation, contract,

insurance or other means.

2. What is Contingency Reserves?

Ans. Contingency reserves refers to the funds or other financial resourcesthat is required to reduce the risk of overruns.

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Activity

Consider that you are a project manager for one of the long term

project. In your project if the team members are taking more leaves

which causes and might cause huge delays in the project delivery

timelines, how would you address the issue of risk appetite here and

what would be the risk mitigation steps that you might take?

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risk handling strategies

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