Four Risk Management Strategies

Every risk requires a response that is appropriate, achievable, and affordable. The four basic risk management strategies are:

1. Accept

2. Avoid

3. Mitigate

4. Transfer

We’ll explain these in more detail below.

Accept

In some instances you must simply accept the risk and the consequences if it is realized. This might happen when there truly are no other strategies available. For example, your project might be dependent upon a certain government approval, the duration of which can vary wildly. In that instance, you probably need to just accept the risk this places on your schedule.

You sometimes also accept a risk when the cost of other strategies, especially mitigation strategies, are higher than the cost of realizing the risk. Perhaps you are using a shared cloud resource, and there is a risk that contention will delay your project by a few days. You could purchase your own resource to avoid the risk altogether, but the cost might be higher than it is worth.

Avoid

The aim of avoidance is to eliminate the risk altogether. One way to do this is to not pursue the activity that gives rise to the risk. For example, perhaps there is a complex enhancement in the project plan that is difficult to estimate and likely to run over schedule. You might choose to defer that enhancement altogether in order to deliver the rest of the project.

Another way to avoid a risk is to execute the triggering task in a way that eliminates the threat. For example, perhaps the project is dependent upon a shared UX designer who is often called away to work on other projects with little notice. This is a resource availability risk. You could avoid the risk altogether by hiring your own UX resource whose time you control.

Mitigate

The aim of mitigation is to put in place strategies to reduce the probability and/or impact of the risk. For example, your project might require the team to learn a new technology, and there is a substantial risk that mastering this tech will take longer than your schedule allows. One strategy to mitigate this risk would be to hire a consultant with expertise in the technology to coach the team and help resolve any issues. This significantly reduces the probability of technical problems delaying you.

Transfer

The aim of the transfer strategy is to move the the risk to another party. The classic risk transference tool is insurance, where you pay someone a fee to assume the risk for you. For example, there is a risk that your facility could burn down, incurring massive costs to relocate and rebuild. Getting fire insurance lets you transfer that risk to the insurance company.

Risk Register by ProjectBalm enables you to implement all of these strategies and more