Risk Response Strategies for Positive Risks (Opportunities)
Risk is an unforeseen event that may have positive or negative effects on the project’s objectives in case of it’s occurence. Risks can be grouped into two categories: Positive Risks and Negative Risks. Basically, positive risks have positive impacts on the project’s goals so that the project team tries to make them happen. On the other hand, negative risks have unfavourable impacts on the project’s goals consequently, the project team tries to minimize their harmful effects. Risk response strategies are used to manage positive and negative risks within a project. In this article we will discuss the risk response strategies for positive risks by using real life examples.
Risk Response Strategies
Risk management is a critical step of project management and the main goal of the Plan Risk Responses process is to establish the most effective strategies for managing project risks. Risk response strategies can be classified into two major categories: strategies for responding to negative risks, or threats and strategies for responding to positive risks, or opportunities.
Strategies to deal with risks may change depending on the type of risk.
The PMBOK® Guide specifies the below positive risk response strategies.
Positive risks have a positive effect on project goals, therefore methods to deal with them will focus on increasing the chances of them arising.
Risk Response Strategies for Positive Risks
Positive risks or opportunities have favourable impacts on the project objectives. Therefore the project team will always desire them to happen. Exploit is the most desired strategy to among others because it provides more benefits. All the same, accept is the least desired strategy because you can not take any action, just hope that it will happen.
Let’s analyze each positive risk response strategy in detail.
The escalate risk response strategy can be used when the opportunity is outside the scope of the project or the project manager’s authority level is insufficient to develop a response. Managers at the program or portfolio level deal with the opportuities by using the escalate risk response strategy.
Simply put, if the project manager’s authority level is not sufficient to realise the opportunity he will contact with top management to handle it. So the opportunity will be escalated to the top management.
Once the opportunity is escalated by them, the project team will not take any action to deal with it. These opportunities may be recorded in the risk register for informational purpose.
For example you are managing a hospital construction project and the client came to your office and told that they considering to have a new hospital in another region. Then asked if your company is interested in bidding for the construction work. You contacted with your program manager and informed him for this opportunity.
This risk response strategy analyzes the root cause of a positive risk and try to increase the probability and the positive impacts of it.
For example, you are managing a power plant project and you are required to complete the project in 24 months. According to the contract, if you complete the project earlier, you will earn bonus. But you are aware of the high cost of early completion thus, you decided to take a less aggressive approach to make the risk at least more probable to happen. Therefore you decided to motivate your project team and promise them a bonus fee for early completion.
The exploit response strategy aims to eliminate the uncertainty by making the opportunity absolutely happen.
For example, you are managing a power plant project and you are required to complete the project in 24 months. According to the contract, if you complete the project earlier, you will earn bonus. Therefore, you decided to take a more aggressive approach to make the risk certainly happen. You decided to transferyour resources to this project form your other projects and you pay overtime to salaried employees in order to exploit this situation.
The accept response strategy is to take advantage of the opportunity if it arises without taking any action to realize the opportunity.
For example, you are managing a housing project and there is highway project very close to you. The project manager of the higway project came to your site and proposed you to sell backfill material with low price. You evaluated this situation and accepted.
Accepting strategy is applicable to both negative and positive Risks.
The share response strategy is to assign the ownership of the opportunity to a third party who is capable of capturing the opportunity for the benefit of the project.
For example, you are planning to participate in a tender but the scope of work requires a certain technical capability. Therefore you will persuade a company which has the certain technical capability to callaborate with your company.
These four strategies can be used to manage positive risks. The project manager decides which strategy type is appropriate considering the risk type and the circumstances of the project. If necessary responses are not implemented, the risk management process will fail, and the chances of the project achieving its goals will be reduced. In this article we discuss each positive risk response strategy and the key aspects of them. We hope that it will be useful for the applicants who will take the PMP and PMI-RMP Exam.