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Program : MBA
Semester : IV
Subject Code : PM0016Subject Name : Project Risk Management
Unit number : 6
Unit Title : Risk Handling Strategies
Lecture Number : 6
Lecture Title : Risk Handling Strategies
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Objectives :
The objectives of this lecture are to:
Introduce Risk Handling Strategies.
Explain the objectives of risk handling.
Devise risk tracking and risk process implementation.
Compare risk acceptance and risk transfer.
Assess the importance of contingency reserves.
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Risk Handling Strategies
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Lecture Outline
Introduction
Risk Handling Strategies
Risk Handling Strategies Objectives Elements of Risk Handling Strategies
Risk Tracking
Risk Acceptance Risk Mitigation
Risk Transfer
Risk Avoidance
Contingency Reserves
Risk Process Implementation
Risk Documentation
Summary
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Introduction
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Risk handling is the process of risk identification, analysis, and
response.
Risk handling process includes the following:
Identification, assessment and the prioritisation of variousrisks.
Minimising, monitoring, and taking control of the probability
and impact of risks by coordinated application of all the
resources.
This unit familiarises you with various risk handling strategies.
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Risk Handling Strategies
The risks handling strategies are:
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Risk handling is a critical aspect in achieving basic and
overall objectives of the project.
Risk handling strategies achieve the following objectives:
Perform risk assessments.
Establish risk handling priorities.
Develop risk handling plans.
Monitor the status of risk handling actions.
Implement appropriate risk management strategies.
Raise awareness of risk management.
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Risk Handling Strategies Objectives
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Unit-6 Risk Handling Strategies
Elements of Risk Handling Strategies
The key elements of risk handling include the following:
Risk function
Identify
Assess
Control
Monitor
Risk policies and governance at board level
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Unit-6 Risk Handling Strategies
Risk Acceptance
Risk acceptance is an informed decision taken to accept the consequences
and likelihood of a particular risk.
An organisation should manage its risks to balance the opportunities
against the potential losses for the overall improvement of the business.
The quantity of risk that an organisation is able to take is often called as
its 'risk appetite' or 'risk tolerance.
Every organisation can accept a level of risk,
If risk mitigation costs are higher than the probable losses.
If risks require mitigation but itisnot possible.
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Risk mitigation refers to the systematic reduction in the likelihood of
risk occurrence.
It is also called as risk reduction.
Risk mitigation includes the following actions:
Prioritising actions
Evaluating recommended control options
Conducting cost-benefit analysis
Selecting control
Assigning responsibility
Developing a safeguard implementation plan
Implementing selected control(s)
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Risk Mitigation
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Risk transfer is the shifting of responsibility or burden for disaster or
loss, to another party through legislation, contract, insurance or other
means.
A good risk response plan identifies the third party to whom
certain risks can be transferred.
It always make the best casescenario less good, the
worst casescenario less bad.
It displaces the expected monetary value towards lower benefit.
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Risk Transfer
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Risk Avoidance refers to reducing risk to the organisation through bettermanagement information.
Risk Avoidance is a business strategy.
Risk Avoidance is a technique of risk management that involves:
Taking steps against a hazard.
Engaging in alternative activity, or otherwise end aspecific exposure.
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Risk Avoidance
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Contingency reserves refers to the funds or other financial resourcesthat is required to reduce the risk of overruns.
It is used to deal with unknown risks and accepted known risks.
It covers risk events that are not accounted for in the project baselineduration and cost estimations.
The considerations for contingency plan are: Actions
Scope Initiation
Roles and responsibilities
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Contingency Reserves
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Risk process implementation is about what ongoing actions shouldbe taken beyond planning.
It focuses on the performance of overall process and its integrationwith the other metrics programs.
Risk process implementation requires:
Clear objectives
Proper planning and resourcing
Effective monitoring and control
Clear success criteria
Risk Process Implementation
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Risk Documentation is an important aspect of risk management.
It has to be done forthe entire risk management process.
It includes data from:
Planning
Assessment
Handling
Monitoring activities
Documentation of risk management activities include creating:
Risk management plan
Risk information form(s)
Risk assessment report
Risk handling priority list
Risk handling plan of action
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Risk Documentation
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Summary
Risk handling means risk treatment. The five Risk handling strategies were discussed.
Risk documentation helps to provide guidance to solve any future
problems or risks.
Contingency reserve helps to find out any possible impact of risk that
involves making a contingency plan to reduce the impact.
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Check Your Learning
1. Define Risk Transfer.
Ans. Risk transfer can be defined as shifting the responsibility or burden
for disaster or loss to another party through legislation, contract,
insurance or other means.
2. What is Contingency Reserves?
Ans. Contingency reserves refers to the funds or other financial resourcesthat is required to reduce the risk of overruns.
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Activity
Consider that you are a project manager for one of the long term
project. In your project if the team members are taking more leaves
which causes and might cause huge delays in the project delivery
timelines, how would you address the issue of risk appetite here and
what would be the risk mitigation steps that you might take?
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