A risk response strategy is an essential part of any successful project management and it can do a lot more than just saving your business from embarrassment, legal action, and financial loss. If you're smart, your strategy can lead to new opportunities and push your company forward. Risk response strategies sort every threat to a project’s progress into separate categories and rank them based on severity.
What are the types of risk responses?
All types of project risks can be tackled with two main categories of response: negative and positive.
Negative responses include:
Accept Positive responses include:
What are examples of risk response?
- Avoid taking a risk altogether, either by omitting a deliverable or planning around it.
- Transfer risks to third parties, such as an insurance company, who can cover the risk on your behalf.
- Mitigate risks that are unavoidable with proactive action such as providing extra training.
- Accept risks that are so minor or unlikely that they pose no real threat to your overall project.
- Enhance your project by finding solutions that are less expensive or more efficient.
- Exploit any opportunities that risks can provide, such as extra time or resources.
What is the aim of a risk response strategy?
Whatever project you’re launching, there will be an element of risk involved. At best, these risks can push you over schedule or over budget, and at worst, they can cause reputational damage. Risk management response strategies help to decrease the likelihood of risks coming to fruition and to limit the damage in cases where they can’t be avoided. A good strategy helps you stay in control of your deadlines and budget by preempting potential issues and resolving them before they become a problem.
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Now you’ve got an idea of some of the types of risk in project management and why you should make a plan, it’s time to get into the nitty-gritty of how to create your strategy. This guide will take you from the first steps before you launch your project to areas where you can turn risks into advantages, so let’s get started!
Conducting an analysis: Identifying project risks
The first thing to do when creating a risk response strategy is to organize all possible eventualities. This isn't a one-person job, so you'll need to gather representatives from every area of the project and combine your expertise. You might think a meeting is the best forum to do this, but meetings with no clear plan will take up more valuable time in the long run. Instead, set up a collaborative document in advance of the meeting where each participant can log any potential issues that could affect their area of work. For example, your finance department may run into unexpected costs, while HR could foresee problems with staff turnover. As a project manager, you can then structure all of the concerns into an agenda for an efficient meeting.
Organizing risks by severity
Once you’ve got your risks together, your job as the project risk manager is to sort them by severity, with the high-priority deal-breakers at the top and the smaller issues at the bottom. This will help you categorize your responses at the next stage and prioritize the most important tasks to implement your plan. Every risk is different in terms of severity. For example, a meteor could feasibly hit one of your construction sites. While most project managers would agree that this would be devastating, it is also incredibly unlikely, so if you're planning on creating the largest list of risks possible you can include it, but it would appear near the bottom of your list. Be sure to review your risk response strategy with your team and any external collaborators to fully understand the risks at play. Then, you can get approval from your seniors and go into further detail.
Categorizing types of project risk
Once you’ve organized the severity of each risk, it’s time to categorize them under the following headings to complete your risk register project management plan.
Risks to avoid are often the easiest to deal with in project risk response strategies. These are the non-negotiables that you adapt your project to avoid and they come in two forms. Firstly, you can simply abandon the idea. Want to set up a wood-burning stove in a flammable tent? While it isn’t certain, a potential fire would cause untold damage to those in attendance as well as your business in legal fees and reputational damage. Decision made: forget the wood-burning stove. However, that could be quite a rash decision if food is important at your event. The second way of avoiding the risk of fire is to adapt your plans to cancel out any risk. For example, you could keep all cooking equipment outside the tent or replace your tent for one made of a non-flammable material. Avoiding risks is a response that can often eat up quite a bit of your budget, so be cautious with how many you avoid by changing plans.
As opposed to avoidance, risks that go into the transfer category don’t disappear, you simply give the responsibility of the risk to an entity outside of your team. One of the most common ways to transfer risk is through good old insurance. We all know how it works; you pay your premium and if the risk occurs, you’re financially covered. An example of business insurance is that which is paid in case of damage to a rented property for an event. Another common way of transferring responsibility is to outsource the risky deliverable to a third party who can assume the risk on your behalf. You would normally choose this route if part of your project was outside of your scope of expertise, or if you simply don’t have the human resources to complete it in time. While you have removed the risk from your team and given it to someone else, this method is likely to use up a significant amount of your budget. Third party services will be accustomed to assuming the risks of others and will factor it into their costs — whether the risk happens or not.
Mitigation refers to work done to reduce risk. These responses are in the face of problematic risks that can be improved with a bit of foresight and planning. Included in mitigation are contingency plans, which can be very costly, albeit necessary. For example, if you have an outdoor event that may be affected by bad weather, it’s a smart idea to have an alternative indoor space or rented tents to keep your guests dry. As part of your risk response strategy, you should create tasks and set aside time to ensure that your mitigation efforts are completed and in place before they are needed.
Accepting risk almost always comes into play when the severity or likelihood (or both) of a risk is so low that no concrete action needs to be taken. Risks of this category can quite easily happen, but you simply provide a solution and move on. However, acceptance doesn’t mean abandoning all responsibility and saying “que sera, sera”. You need to communicate these risks to your entire team so nothing comes as a surprise. Teams already under stress can instinctively react to things they see as risks if they haven’t been told in advance, so be clear about what your accepted risks are.
Positive risk response strategies
Those with enough experience will know that not all types of risk in project management are negative. Positive risks are more commonly known as opportunities, but still have a level of doubt in their probability of occurring. There are two main types of positive risk:
Enhancement is an example of a positive risk response strategy that improves your project by running tasks more efficiently or cost effectively. In most cases, these responses are closely linked to good preparation. For instance, if you have identified a new wholesaler who could potentially provide the same raw materials but at a lower cost, you can put it into the enhancement category. As of now, your new deal may not be 100 percent certain, but it is a possible opportunity to reduce costs.
Exploitation refers to plans put in place that can turn a risk into a benefit. For example, an app development team may be “at risk” of finishing early. You won’t want to change your release date in case you confuse your customer base, but you can build in “nice-to-haves” for your team to work on with their unexpected free time. Perhaps you want to include an extra feature to your app and launch a product that is even better than expected.
Tools you’ll need for your risk response strategy
Now you’ve got all your potential risks laid out in your risk register project management plan, you’re almost ready to go. But a plan itself won’t solve any problems — you need a way of putting your preparation into action. The best way to implement your strategy is with the right tools.
A project management system
Starting with the obvious, a great project management tool can help you and your team organize all of your ideas in precise detail. Each task can be assigned to the relevant people and everybody will receive notifications for every update. As part of your plan, you can prepare tasks for every eventuality, walk your team through them, and activate them only when necessary. Similarly, tools like Bitrix24 allow you to create templates that you can reproduce without putting in the leg work. Templates work perfectly for acceptable risks as you can quickly activate them and deal with issues efficiently. A good project management tool also allows you to create mitigation plans as part of your risk response strategy with expected deadlines, assigned roles, and predicted outcomes.
Calendars and visualizations
Like project management as a whole, risk management response strategies can benefit greatly from shared calendars where you can see the overall picture as well as the finer details. One of the best visualizations for your calendars is a Gantt chart. Perfect for project management, you can see how much time everybody’s tasks are taking up and where there are free gaps. This comes in handy when you need to make quick decisions to deal with an accepted risk, and you can easily see where there is time to be exploited as an opportunity.
Multiple communication channels
Quick, reliable communication is another top priority for risk response strategies and you’ll need to have multiple channels for all your different needs. For example, you can use emails to send official updates to stakeholders, while keeping instant messenger and phone lines open for urgent communication with your team in case of emergency.No matter how detailed your project, you’ll undoubtedly come across unexpected issues, and having a range of communication channels at the ready is a great way of mitigating any problems that arise.
Bitrix24 offers a dynamic, all-in-one business tool that covers all your bases and allows you to put your plan into practice. What’s more, you can access your risk response strategy and practical tools via your smartphone or your desktop, so whether you’re in the office or on the move, you can always stay connected. Get started for free today.
What is risk response in project management?
Risk response is a plan that provides options and actions that reduce potential problems throughout a project, and enhance and exploit opportunities as a result of said risks.
A risk response strategy deals with every aspect of a project, from deadlines and costs to external providers and communication with stakeholders.
Who is responsible for developing a risk management strategy?
The person responsible for creating project risk response strategies is not fixed. A project manager can assign a team member (or themselves), but the most important thing is that the chosen person understands the role.
Your risk manager will draw up a risk register, lead meetings, and update their strategy throughout the project where necessary. Your risk manager should report to the project manager or committee, depending on the team structure.