Project Management Institute

PMI Study Group - RMP - 2017.1

Plan Risk Responses

David Silva| davideng@bol.com.br

Apparicio Ramalho| apparicio@gmail.com
 KEY TERMS

PLAN RISK RESPONSES PROCESS SECONDARY RISKS

EXPLOIT TRIGGERS

ENCHANCE RISK RESPONSE PLANS

CONTIGENCY PLAN
SHARE
FALLBACK PLAN
ACCEPT
RESERVE
AVOID
MANAGEMENT RESERVE
MITIGATE
CONTIGENCE RESERVE
TRANSFER INSURANCE
MITIGATE THE PROBABILITY CONTRACT
MITIGATE THE IMPACT RISK OWNER

RESIDUAL RISKS RISK ACTION OWNER

 Objective and Benefit of the
Plan Risk Responses

Objective: The primary objectives are to validate risk

responses and Risk Owners identified during the Identify
Risks activity, or develop risk responses for risks on the
Urgent List and assign Risk Owners if not previously
accomplished.

Benefit: The key benefit of this process is that it addresses

the risks by their priority, inserting resources and activities
into the budget, schedule and project management plan as
needed.
Note: Identify Risks process use experience, perform
Qualitative and Quantitative Risk Analysis process use
analytical and mathematical skills, this step uses
CREATIVITY.
PMBOK - Data Flow Diagram
 Process Overview

Fonts: PMBOK (PMI)

 Process Overview

Fonts: Daniel C. Yeomans

 Inputs

1. Risk Management Plan

Roles and responsibilities;
Risk analysis definitions;
Timing for reviews;
Risk thresholds (low, moderate and high).

2. Risk Register
Identified risks;
Root causes of risks;
List od potential responses;
Risk owners;
Symptoms and warning sings;
Priority list;
Risks requiring responses in the near term;
Risks for additional analysis and response;
Trends (qualitative analysis results);
Watch list (low priority).
Options for the Plan Risk Responses Process

Strategies (Negative and Positive Risks):

The strategy or mix of strategies most likely to be effective

should be selected for each risk;

A fallback plan can be developed for implementation if the

selected strategy turns out not to be fully effective or if an
accepted risk occurs;

Secondary risks are risks that arise as a direct result of

implementing a risk response (and also be reviewed!!);

Allocated Contingency Reserve (time or cost). And

identification of the conditions that triggers its use.
Options for the Plan Risk Responses Process

STRATEGIES FOR RISKS

EXPLOIT (100%) AVOID (0%)

ENHANCE ($ e/ou %) MITIGATE ($ e/ou %)

SHARE ($ + %) TRANSFER ($ + %)

ACCEPT (---) ACCEPT (---)

Options for the Plan Risk Responses Process

1. Strategy for Negative Risks and Threats: AVOID

Acts to eliminate the threats or protect the project from its
impact.

Usually involves changing the project management plan to

eliminate the threats entirely.

The PM may also isolate the project objectives from the

risks impact or change the objective that is in jeopardy.

Examples: Extending the schedule;

Changing the strategy;
Reducing scope.
Options for the Plan Risk Responses Process

1.Strategy for Negative Risks and Threats: TRANSFER

Transference the impact to a third part, together ownership

of the response. ATENO: IT DOES NOT ELIMINATE IT!!!!!
Nearly always involves payment of a risk premium.
Transferring liability for risk is most effective in dealing
with financial risk exposure.
Transference Tools: Insurance;
Perfomance bonds;
Warranties;
Guarantees, etc.
Contracts or agreements may be used to transfer liability
for specified risks to another party.
Options for the Plan Risk Responses Process

1. Strategy for Negative Risks and Threats: MITIGATE

Acts to reduce the probability of occurrence or impact of an

adverse risk to be within acceptable threshold limits;
Taking early action is often more effective than trying to
repair the damage after the risk has occurred;
Examples: Adopting less complex actions;
Conducting more tests;
Choosing a more stable supplier;
Prototype development;
Where it is not possible to reduce probability, a mitigation
response might address the risk impact by targeting
linkages that determine the severity.
Examples: Redundancy.
Options for the Plan Risk Responses Process

1. Strategy for Negative Risks and Threats: ACCEPT

Decides to acknowledge the risk and not take any action
unless the risk occurs;
Adopted where it is not possible or cost-effective to address
a specific risk in any other way;
Decides not change the project management plan to deal
with a risk, or is unable to identify any other suitable
response strategy;
Passive acceptance: not actions; Document the strategy
Periodically review the
threat
Active acceptance (common): Contingency Reserve.
Time
Including amouts: Money
Resources
Options for the Plan Risk Responses Process

2. Strategy for Positive Risks and Opportunities:

EXPLOIT
The organization wishes to ensure that the opportunity is
realized (seeks to eliminate the uncertainty associated with
risk by ensering the opportunity definitely happens);

Examples: Assigning organizations most talent resources

to the reduce time to completion;
Using new technologies or upgrades technology.
Options for the Plan Risk Responses Process

2. Strategy for Positive Risks and Opportunities:

ENHANCE
Increase the probability and/or the positive impacts of an
opportunity;

Identifying and maximizing key drivers of the positive-

impact risks may increase the probability of the occurrence;

Examples: Adding more resources an activity to finish

early;
Options for the Plan Risk Responses Process

2. Strategy for Positive Risks and Opportunities:

SHARE
Involves allocating some or all of the ownership of the
opportunity to a third party who is best able to capture the
opportunity for the benefit of the project;

Examples: Forming risk-sharing partnerships;

Teams;
Special-purpose companies;
join ventures.
Options for the Plan Risk Responses Process

2. Strategy for Positive Risks and Opportunities:

ACCEPT
Being willing to take advantage of the opportunity if it
arises, but not actively pursuing it.
Options for the Plan Risk Responses Process
Options for the Plan Risk Responses Process

3. Contingent Response Strategies (Contingency plans)

To make a response plan that will only be executed under

certain predefined conditions.

Events Triggers the Contingency response

Examples: As missing intermediate milestones;
Gaining higher priority with a supplier.

4. Expert Judgment
 Outputs for Plan Risk Responses

1. Project Management Plan Updates:

Schedule management plan;

Cost management plan;
Quality management plan;
Procurement management plan;
Human resources management plan;
Scope baseline;
Schedule baseline;
Cost baseline.

2. Project Documents Updates:

Appropriate risk responses are chosen and agreed upon,
they are included in the risk register (priority ranking and
the planned response).
 Outputs for Plan Risk Responses

1. Updates to the Risk Register:

Risk owners and assigned responsibilities;

Agreed-upon response strategies;
Specific actions to implement the chosen response strategy;
Trigger conditions, symptoms and warming sings;
Budget and schedule activities required to implement the
chosen responses;
Contingency plans and triggers;
Fallback plans;
Residual risks;
Secondary risks;
Contingency reserves.
 Outputs for Plan Risk Responses

1. Updates to the Risk Register:

Other updates for project documents:

Assumptions Log Updates;

Technical Documentation Updates;
Change requests.
 Steps of the Plan Risk Response
Process

1. All risks should be identified in the Risk Register. Generally,

responses are developed for those risks listed on the Urgent List.
2. Risk Owners are identified initially during the Identify Risks
activity. They are confirmed during the Plan Risk Responses activity.
3. Risk Owners develop Contingency Plans or Risk Response Plans.
They also identify potential triggers. Triggers are any event that
provide an early warning that a risk is about to occur. The response
plan is implemented when a trigger occurs.
4. Fallback Plans are also developed by the Risk Owner. These plans
are implemented if the Contingency Plan does not provide the desired
response.
5. Risk Owners monitor all risks they are assigned as owners for.
They provide periodic status updates as required. They respond to
risks when required. They team with Risk Action Owners when
responding.
 Steps of the Plan Risk Response
Process

6. Plan Risk Response Forms for Threats and Opportunities

Forms are useful to facilitate planning and help the risk team make
sure to explore all options before selecting the answer for the risk.
 Steps of the Plan Risk Response
Process

Additional notes:

GO / NO GO Decision After all analysis, if the project dont meet

the objective, management may choose to cancel the project. It makes
sense if the risk is too high or the cost too great

Residual Risks Risks that remains after the Plan Risk Responses
process. Contingency plans and fallback plans are created for these
risks. Take care for the value or time-consuming of these plans
doesnt have a greater impact than the risks. This can happen.

Create Reserves: It is required in project management and is part of a

certified project managers professional responsibility to include.
There are 04 different methods to choose.
 Steps of the Plan Risk Response
Process

Additional notes:

Reserve methods:

Method 1 - 10 percent Add this percent of time and cost as a

reserve for both, contingency and management reserve. It is not based
on the risk s of the project.

Method 2 - Guess Use the appropriate amount of time and cost

contingency reserve based on the number and severity of the risk, and
add it to the time and cost to create the final schedule and budget.
Add a separate management reserve based on percentage of project
cost (e.g. 5 percent). These reserves are better than no reserves at all,
but they are not defensible if questioned by management.
 Steps of the Plan Risk Response
Process

Method 3 - Expected Money Value Take the total cost of all

activities (total direct cost plus overhead costs and profit margin. Find
the expected monetary value of the risks to create a contingency
reserve. Add 5 % for a management reserve. The total is the project
budget.

Project Budget = cost of activities + contingency reserve (based

on the expected value of cost of risks) + management reserve

Method 4 - Monte Carlo Simulation It is not a preferred method

to determine reserves. It is only as good as the work breakdown
structure, the network diagram and estimates it is based on. If you
like to be more analytical, first do detailed calculations using
Expected Money Value and then use the Monte Carlo method as
check.
 Tricks for the Plan Risks Responses
Process

Are you ready to plan responses?

Do not just pick the first choice presented

Do risk response planning in a group

Let the risk team know the process

 Keys to Success

PEOPLE;

PLANNING;

CONSISTENCY;

ANALYSIS;

OPPORTUNITIES AND THREATS;

DOCUMENTATION UPDATES;

PROJECT MANAGER SUPPORT.

MATCHING GAME

IS TIME!!!!!
 KEY WORD RESP DEFINITION

1 Plan Risk Responses process A Risk that are generated by response to another risk

2 Exploit B Eliminate the threat of a risk by eliminating the cause

3 Contigency plan
4 Trigger
5 Avoid
6 Risk action owner
Do nothing - "if it happens, it happens", or create a contigency
C
plan
Retain appropriate opportunities or parts of opportunities
D
instead of attempts to transfer them to others
Increase the expected time, quality, or monetary value of a risk
E
by increasing its problability or impact of occurrence
F Increase the opportunity by making the cause more probable.

7 Accept G Assigns the liability for a risk to someone else.

An amount of time and/or cost added to the project to account for
8 Transfer H
risks
A legal agreement for the purchase or sale of goods and
9 Enchance I
services
An amount of time and/or cost added to the project to deal with
10 Share J
known unknowns, i.e., identified risks.
Determining what can be done to reduce the overrall risk of the
11 Residual risks K project by decreasing the probability and impact of threats and
increasing the probability and impact of opportunities.
Planned actions to be taken if the risk happens and contigency
12 Risk owner L
plans ate not effective.
13 Reserve M Risks that remain after risk response planning
Assign the risk to someone else by subcontrating or buying
14 Management reserve N
insurance.
15 Contingency reserve O Planned actions to be taken if the risk happens.
Reduce the expected monetary value of a risk by reducing its
16 Contract P
impact or probability of occurrence.
An amount of time and/or cost added to the project to deal with
17 Insurance Q
unknown unknowns, i.e., risks that have not been identified.
The person assigned by the project manager to watch for
18 Secondary risks R
triggers and manage the risk response if the risk occurs.
19 Fallback plan S Early warning sign that a risk has occurred or is about to acccur.
The person assigned by the risk owner to implement approved
20 Mitigate T
risk responses.
The person assigned by the risk owner to implement
21 Risk action owner U
preapproved risk responses.
 KEY WORD GAB RESP DEFINITION

1 Plan Risk Responses process 18 A Risk that are generated by response to another risk

2 Exploit 5 B Eliminate the threat of a risk by eliminating the cause

3 Contigency plan
4 Trigger
5 Avoid
6 Risk action owner
Do nothing - "if it happens, it happens", or create a contigency
7 C
plan
Retain appropriate opportunities or parts of opportunities
10 D
instead of attempts to transfer them to others
Increase the expected time, quality, or monetary value of a risk
9 E
by increasing its problability or impact of occurrence
2 F Increase the opportunity by making the cause more probable.

7 Accept 17 G Assigns the liability for a risk to someone else.

An amount of time and/or cost added to the project to account for
8 Transfer 13 H
risks
A legal agreement for the purchase or sale of goods and
9 Enchance 16 I
services
An amount of time and/or cost added to the project to deal with
10 Share 15 J
known unknowns, i.e., identified risks.
Determining what can be done to reduce the overrall risk of the
11 Residual risks 1 K project by decreasing the probability and impact of threats and
increasing the probability and impact of opportunities.
Planned actions to be taken if the risk happens and contigency
12 Risk owner 19 L
plans ate not effective.
13 Reserve 11 M Risks that remain after risk response planning
Assign the risk to someone else by subcontrating or buying
14 Management reserve 8 N
insurance.
15 Contingency reserve 3 O Planned actions to be taken if the risk happens.
Reduce the expected monetary value of a risk by reducing its
16 Contract 20 P
impact or probability of occurrence.
An amount of time and/or cost added to the project to deal with
17 Insurance 14 Q
unknown unknowns, i.e., risks that have not been identified.
The person assigned by the project manager to watch for
18 Secondary risks 12 R
triggers and manage the risk response if the risk occurs.
19 Fallback plan 4 S Early warning sign that a risk has occurred or is about to acccur.
The person assigned by the risk owner to implement approved
20 Mitigate 6 T
risk responses.
The person assigned by the risk owner to implement
21 Risk action owner 21 U
preapproved risk responses.