Project Risk Management Strategy | How to Manage Risks | How to manage Threats and Opportunities

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Risk Management Strategy | How to Manage Risks | How to manage Risk Threats and Opportunities

// Negative Risk Strategies

There are five strategies for managing negative risks or threats. These strategies are selected based
on the risk's probability and impact on the project. Critical risks with high impact should be avoided
or mitigated, whereas less critical risks can be transferred or accepted. You may also outsource
critical risks and avoid less critical risks without having to accept them.

1. Avoid: Changing the project management plan to remove the risk entirely by extending the
schedule, changing the strategy, increasing the funding, or reducing the scope. Some risks can be
avoided entirely by clarifying requirements, obtaining more information, improving
communication, or acquiring expertise in that area of risk.

2. Mitigate: Taking action to reduce the probability of occurrence or the impact of a risk.
Adopting less complex processes, increasing the duration of an activity, conducting more testing,
and choosing a more stable supplier are examples of mitigating risk.

3. Transfer: Shifting the impact and ownership of the risk to a third party and paying a risk
premium to the party taking on the liability of the risk. This can be done with insurance,
performance bonds, warranties, guarantees, contracts or agreements, and so on. An example of
when you may want to transfer risk is in the case of having little internal experience performing a
particular type of work on a project. In this case, you may want to outsource that work to a
vendor that is more capable of performing it.
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4. Accept: Acknowledging a risk and not taking any action until the risk occurs. Acceptance can be
either a passive or an active strategy. An example of passive acceptance would be simply
acknowledging and documenting the risks. Then, the risk management team can periodically
review the threat and determine what, if any, action to take with risks as they occur. A common
active acceptance strategy involves creating a contingency reserve with amounts of time, money,
or resources to address the risk if it happens.

5. Escalate: Determining that the threat is outside the scope of the project or beyond the project
manager's authority, and then forwarding the threat to a person or part of the organization at a
higher level such as the program level, portfolio level, or other part of the organization. To
consider the threat escalated, the new person or party must accept ownership of it. The escalated
threat is documented in the risk register, but the project team no longer monitors it.

// Positive Risk Strategies

There are five strategies for managing positive risks or opportunities. These strategies are selected
based on the risk's probability and impact on the project.

1. Exploit: Attempting to make sure that the opportunity happens. Examples include assigning the
best resources to the project, hiring an expert consultant or using new technology to reduce
project cost and duration.

2. Enhance: Increasing the probability that the opportunity will happen or the impact it will have
by identifying and maximizing enablers of these opportunities. An example is to add more
resources to an activity so it finishes early.


3. Share: Allocating some or all of the ownership of the opportunity to a third party. Examples
include risk-sharing partnerships, teams, special purpose companies, or joint ventures.

4. Accept: Being willing to take advantage of an opportunity if it happens, but not actively pursuing
it.

5. Escalate: Forwarding opportunities that are beyond the scope of the project. The opportunity is
escalated to the level in the organization that would be affected if the opportunity materializes.