Wednesday, January 14, 2009

Accepting Risks with a Contingency Plan

In addition to avoidance, transference, and mitigation, acceptance is also an important strategy for effective risk response planning. Acceptance is a strategy that indicates that a project manager and a project team have decided not to change the established project plan in order to deal with an identified risk. Acceptance may also be performed if a project manager is unable to identify any other suitable risk response strategy to effectively handle the identified risk.

If you choose to accept a project risk, you need to develop a contingency plan that can be implemented should the risk occur. Developing a contingency plan in advance can greatly reduce the cost of future risk responses.

Every contingency plan contains specific details that are only relevant to the identified risk and the project at hand. However, all contingency plans should contain the following components: the plan objective, implementation criteria, roles and responsibilities, resource requirements, operation procedures, and discontinuation criteria.
  • The plan objective
    For a contingency plan to be effective, a project manager must first ensure that there is an established plan objective. This objective should clearly detail the risk of failure that prompted the creation of the contingency plan.

    A project manager must also decide what the desired outcome of implementing the plan will be: to continue normal operations, to continue operations in a degraded mode or to abort a project area as quickly and as safely as possible. The plan objective should also outline the potential impact, in terms of financial costs, on the organization.

  • Implementation criteria
    In addition to establishing a plan objective, a project manager must ensure that an effective contingency plan contains well-defined implementation criteria.

    You and your project team must understand when your contingency plan should be implemented. In addition, this criteria outlines the specific failure, or risk trigger, that necessitates the start up of your project's contingency plan. For example, the contingency plan will be implemented in the event of a network failure.

  • Roles and responsibilities
    The third essential component of an effective contingency plan is the designation of roles and responsibilities. A project manager must decide who will be responsible for making implementation decisions, such as implementing the contingency plan or informing the team that the project is operating in contingency mode.

    The roles and responsibilities component clearly outlines who is responsible for plan implementation. For example, the technical engineer on duty will be in charge of activating the contingency plan in case of a network failure.

  • Resource requirements
    The resource requirements component details the equipment, supplies, funding, and overtime estimates needed to activate the planned response. To create a list of required resources, you need to ask yourself the following questions.
    • What equipment will be needed to implement the contingency plan? What equipment will be required once the plan is activated and in full operation?

    • What types of materials or supplies will be needed to implement and operate the contingency plan? What quantity of materials and supplies will be required?

    • How much should your contingency plan budget be in order to effectively fund the contingency mode operations?

    • How much overtime will employees be expected to undertake in order to keep the project on track during contingency mode?

    Having a list of resource requirements available before an emergency arises allows you to move quickly and easily into contingency mode to meet the plan objective.
  • Operation procedures
    Operation procedures outline plan implementation instructions so that everyone will know what to do in an emergency. For example, in case of a network failure, Sarah will switch the network to backup mode in order to save important data.

    The procedures must also describe how project personnel will be informed that the plan is being implemented. Operation procedures should also define how records will be managed and data security ensured.
  • Discontinuation criteria
    Discontinuation criteria describe how to determine when a project should move from contingency mode back to normal operating mode. This criteria will outline the conditions or events and the timing that make it possible to discontinue the contingency plan. For example, the network has to be fully tested and be 100 percent operational before returning to normal mode.
The development of an effective contingency plan, as part of acceptance, will help you create options and potential actions that will serve to reduce threats to critical project objectives and to promote project success.

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