A Guide to Project Management

Of risks for additional analysis and management this

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Unformatted text preview: t Management Body of Body of KnowledgeE L KnowledgeE PL 35% 60 Product Demand 49 10 MP AM SA S 11.5.2 Tools and Techniques for Risk Response Planning Several risk response strategies are available. The strategy that is most likely to be effective should be selected for each risk. Then, specific actions should be developed to implement that strategy. Primary and backup strategies may be selected. A Guide to the Project Management Body of Knowledge (PMBOK Guide) 2000 Edition 2000 Project Management Institute, Four Campus Boulevard, Newtown Square, PA 19073-3299 USA NAVIGATION LINKS ACROYMNS LIST ACRONYMS LIST 141 ACROYMNS LIST Chapter 11--Project Risk Management Figure 117 | Total Project Cost Cumulative Chart 1.000 5000 .750 Probability .500 .250 12% .000 30.00 Mean= 46.67 $41 38.75 $50 47.50 56.25 65.00 0 ment ment Cost $ This cumulative likelihood distribution reflects the risk of overrunning the cost estimate assuming triangular distributions with the range data contained in Figure 114. It shows that the project is only 12 percent likely to meet the $41 estimate. If a conservative organization wants a 75 percent likelihood of success, a budget of $50 (a contingency of nearly 22 percent) is required. geE L geE PL Figure 117. Cost Risk Simulation P .1 Avoidance. Risk avoidance is changing the project plan to eliminate the risk or condition or to protect the project objectives from its impact. Although the project team can never eliminate all risk events, some specific risks may be avoided. Some risk events that arise early in the project can be dealt with by clarifying requirements, obtaining information, improving communication, or acquiring expertise. Reducing scope to avoid high-risk activities, adding resources or time, adopting a familiar approach instead of an innovative one, or avoiding an unfamiliar subcontractor may be examples of avoidance. .2 Transference. Risk transfer is seeking to shift the consequence of a risk to a third party together with ownership of the response. Transferring the risk simply gives another party responsibility for its management; it does not eliminate it. Transferring liability for risk is most effective in dealing with financial risk exposure. Risk transfer nearly always involves payment of a risk premium to the party taking on the risk. It includes the use of insurance, performance bonds, warranties, and guarantees. Contracts may be used to transfer liability for specified risks to another party. Use of a fixed-price contract may transfer risk to the seller if the project's design is stable. Although a cost-reimbursable contract leaves more of the risk with the customer or sponsor, it may help reduce cost if there are midproject changes. .3 Mitigation. Mitigation seeks to reduce the probability and/or consequences of an adverse risk event to an acceptable threshold. Taking early action to reduce the probability of a risk's occurring or its impact on the project is more effective than trying to repair the con...
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This document was uploaded on 09/27/2013.

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