It should be noted that the process of risk response planning should begin after management has conducted a risk analysis; otherwise, the proposed strategies might not effectively address the emerging risks.
The assessment and analysis can be both qualitative and quantitative; however, it is advisable to conduct a mixed evaluation to obtain more comprehensive results. Once the risks have been identified, it is necessary to determine those employees who will be responsible for the implementation of the responsible approach, as well as those who will consider and develop the necessary preventive actions to the threats (Moran 166). In general, the response plan includes the development of methods and measures that will help reduce the threat, to ensure the company will achieve its corporate goals and increase its positive opportunities.
Various methods of responding imply specific strategies for mitigating risks. In turn, response strategies are those approaches that will be applied to decrease the effects or likelihood of the identified risks. Each threat might require a particular approach or a mix of measures to achieve the most effective outcomes for the company (Pritchard 323). To choose the right strategy for risk management, each company should justify its actions based on the amount of time, money, and other resources that are available to it. In general, there are four major risk response strategies aimed at eliminating or preventing the appearance of negative threats. These are avoidance, transfer, acceptance, and mitigation (Pritchard 323).
This approach is aimed at eliminating any risk exposure that could be possible due to alterations like the company’s activities or changes in the project management plan. Some risks that are likely to arise at the early stages, for instance, due to a lack of concrete customer requirements, can be avoided with the help of this approach (Hopkin 234). This type of risk response implementation can be done through spending extra time and increasing labor costs for threat identification, but it will allow meeting the objectives of the project. This strategy cannot eliminate the risk, but it should be the first consideration when weighing a company’s risk management response.
This strategy involves transferring the negative consequences of risk to a third party that will also be responsible for responding to the threat. This approach includes paying premiums for taking the risk and for bearing the liability in case of its occurrence. From the standpoint of this strategy, the risk is not to be eliminated (Dinsmore and Cabanis-Brewin 201). However, the approach cannot be considered feasible, and the company needs to evaluate the cost-effectiveness of the strategy if management decides to implement it.
The third strategy implies the company’s decision not to evade the risk. In this case, if there is a threat, the team accepts it, thinks through the possible solutions by the circumstances, and decides how to deal with the consequences (Dinsmore and Cabanis-Brewin 201). The company can also work out a plan of action in advance. It should be assumed that this type of risk response is advisable when other strategies cannot be implemented.
This approach involves an effort of the management team to reduce the likelihood of the emergence of predicted consequences of the risk to acceptable limits. In the strategy, the inclusion of additional work to be carried out is assumed, regardless of the occurrence of risk in the project plan (Schibi 200). For example, it is possible to increase the workload of the experienced staff.
In conclusion, the four strategies of risk response allow addressing threats from different perspectives. The company should consider the available resources and the setting to be able to choose the most effective approach (Wilson 232). It is essential that no matter which strategy is chosen, there will be a team of experienced employees who will be held responsible for monitoring the risks.
Dinsmore, Paul, and Jeannette Cabanis-Brewin. The AMA Handbook of Project Management, New York: AMACOM, 2011. Print.
Hopkin, Paul. Fundamentals of Risk Management, London: Kogan Page Publishers, 2014. Print.
Moran, Alan. Managing Agile, New York: Springer, 2015. Print.
Pritchard, Carl. Risk Management, Boca Raton: CRC Press, 2014. Print.
Schibi, Ori. Managing Stakeholder Expectations for Project Success, Newcastle: J. Ross Publishing, 2013. Print.
Wilson, Randal. Mastering Project Management Strategy and Processes, Upper Saddle River: FT Press, 2014. Print.