Introduction - Plan Risk Responses

In the previous sections, we learnt how to analyze all the risks that we have identified in our project so far. So, what is the next logical step now?

You know what the risk is, its probability, and its impact including the monetary impact and hence are in a great position to decide how to handle the risk appropriately, isn’t it? So, the next logic step would be to decide – what to do in response to each of those risks. That is what we are going to do in this section which is titled “Plan Risk Responses”

Purpose of Plan Risk Responses:

The purpose of this process is to develop options and actions that will reduce the threat of negative risks and/or increase the opportunity of the positive risks.

Simply put, you just decide what you are going to do for each of the risk. Plus, an owner is assigned for each risk so that he/she can track the risk appropriately.

Trivia:

Assigning a risk owner is better than a single person keeping track of an unmanageable quantum of risks. In real life, if you perform Risk Identification for a large Project the list will run into numerous risks. So, if you ask a single person to track all of them, it is quite possible that some of the risks maybe missed. So, its better we assign a manageable number of risks to different people and let them stay on top of those risks.

Once the possible responses for each of the risks are formulated, we typically must ask ourselves the following questions before finalizing the response for each risk:

1. Is the response appropriate in comparison to the significance of the risk?
2. Is the response cost effective in meeting all the challenges posed by the risk?
3. Is the response realistic?
4. Have all parties (stakeholders) agreed to the response?
5. Has an owner responsible for the risk been assigned?
6. Is the response planned for execution at the right time?
7. Has the best response been selected from the available options?

If you can answer yes for all of at least a majority of these questions, then we can be pretty sure that the response we have selected would be good.

A point to remember here is that, the responses we develop and when we actually implement those responses depends on various factors including the probability and impact of the risk. Also, in some smaller projects, quantitative risk analysis may or may not happen. In such cases, the “Plan Risk Responses” activity happens right after Qualitative Analysis. However, it would be a good idea to do Quantitative Analysis before planning responses.

This whole Plan Risk Responses activity can be summarized using the image below:




We take a bunch of inputs which include your risks, their details, the analysis you have performed so far and any other relevant information, we apply some response strategy for each of those risks and then formulate the Risk Response Plan for the project.

Remember that there are different strategies for different risks. For ex: If a risk could cause losses (A Negative Risk) we may want to find out options to avoid it whereas if a risk could cause profits or benefits (A Positive Risk also known as an Opportunity) then we may want to capitalize on it to ensure that the benefits are achieved.

Don’t worry just yet about the strategies because there will be whole chapters dedicated to them shortly…

Prev: Section Summary - Updates to Risk Register after Quantitative Analysis

Next: Inputs used in the Plan Risk Responses process

Risk Management & the PMBOK Guide

Are you PMP certified? Or have you read the PMBOK Guide? If so, you would already know that Risk Management is one of the 9 Project Management Knowledge Areas. The Risk Management Knowledge area of the PMBOK Guide will be a valuable resource in your preparation for the Risk Management Professional certification exam. Our exam preparation will closely follow how the PMBOK guide covers Risk Management.

If you are not PMP certified yet or do not have a copy of the PMBOK guide, don’t worry. In my earlier series on the PMP Certification exam preparation, I have covered the area of Risk Management in great detail. If you go through the chapters on Risk Management there, you should have more than enough information to proceed with your RMP exam preparation…

Risk Management Processes – As Per the PMBOK Guide

As per the PMBOK Guide, the Risk Management Knowledge Area is split into 6 distinct processes. Below is a short description of those processes with a link to learn more details about it. Those links contain the details regarding each of these processes from the PMBOK’s Perspective. That will be the basis for us in understanding the details that we will be covering in future from the RMP Exam perspective. So, spend some time and go through those chapters so that you establish the minimum level of knowledge required to easily progress towards the RMP Certification Examination.

The Risk Management Knowledge area includes the following Processes:

1. Plan Risk Management – Risk management planning is the process used to decide how the risk management activities for the project at hand will be performed. You can learn more about this Plan Risk Management process by Clicking Here
2. Identify Risks – The Identify Risk Process is the process where we actually identify all those uncertain events that might affect our project or its outcome. You can learn more about the Identify Risks process by Clicking Here
3. Perform Qualitative Risk Analysis – This is the process where we assess the Probability of the Risk event occurring and the Impact of the same. At the end of this process we will have a prioritized list of risks that we need to analyze further. You can learn more about the Perform Qualitative Risk Analysis process by Clicking Here
4. Perform Quantitative Risk Analysis – This is the process where we take the prioritized list of risks and apply mathematical analysis on them. You can learn more about the Perform Quantitative Risk Analysis process Clicking Here
5. Plan Risk Responses – This is the process where we will be deciding how we are going to handle the risks identified & analyzed in the previous processes if they occur. You can learn more about the Plan Risk Responses process by Clicking Here
6. Monitor & Control Risks – This is the process where we monitor the identified risks and identify & respond to new risks as they appear. You can learn more about the Monitor & Control Risks process by Clicking Here.

The whole Risk Management activity progresses step by step through these 6 processes. This is exactly how this blog is structured too. An important point to note here is that, the output of each of these processes serves as the input to the subsequent process. We will start with Plan Risk Management and progress towards Monitor & Control Risks…


The Risk Management Plan

The Risk Management Plan is the heart of our Risk Management activity and it is the artifact based on which we will be taking up each and every activity of Risk Management. The Risk Management Plan (we will call it RM Plan going forward) is a component of the Project Management Plan. We will be using the following as inputs to create the RM Plan:

a. Cost Management Plan
b. Schedule Management Plan
c. Communications Management Plan
d. Project Scope Statement
e. Organizational Process Assets &
f. Enterprise Environmental Factors

Don’t worry if you think I haven’t given much detail about the RM Plan creation here because there will be a whole section dedicated to it in future…

Key Inputs & Outputs of these Risk Management Processes

The RM Plan is the key output of the Plan Risk Management Process. As outlined in the previous paragraph on the Risk Management processes, the Identify Risks process takes this RM Plan as input and creates the Risk Register as the output. Each of the subsequent processes will take this Risk Register as input and then add or update it with more details and pass it on as input to the next process. This means that the Risk Register is going to be updated multiple times as it goes from Identify Risks to the Monitor & Control Risks process.

Along with the Risk Register, the Monitor & Control Risks process also uses Performance Reports (from the Report Project Performance process) and the Work Performance Information (from the Directing and Managing Project Execution process) that are created during the general Management of the Project. Also, any changes that may be suggested as output of this process will be submitted and put through the Perform Integrated Change Control process.

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Next: Understanding the Project Environment