Monday, January 12, 2009

Methods for Mitigating Project Risks

All project managers want to make certain that their projects are on the road to successful project completion. One way for project managers to accomplish this is to use a risk response strategy called mitigation. Mitigation attempts to reduce the probability and consequences of identified project risks to an acceptable threshold.

It is important to remember that taking early action to reduce the probability of a risk's occurrence or its consequences on critical project objectives is often more effective than trying to repair the adverse consequences after the risk has occurred. During the risk response planning process, every effort should be made to prepare for project risks in advance so that a project's completion will not be severely threatened by its identified risks.

Project managers use two primary strategies to mitigate identified risks. The first strategy is to reduce risk probability. The second is to reduce risk consequences.
  1. Reduce risk probability.
    Reducing risk probability is a mitigation strategy that attempts to deal with a risk before it gets out of control. Since not every risk can be avoided, reducing its probability of occurrence to the lowest possible percentage may be the most effective and realistic option.

    The purpose of reducing the probability of a risk's occurrence is to minimize the potential threat to critical project objectives and outcomes. Examples of reducing risk probability include safety training, improved quality of project materials, cost control systems or marketing a more stable and sellable product.

    Reducing risk probability is a preventative approach and its corresponding risk responses are always implemented before a risk actually occurs.

  2. Reduce risk consequences.
    In many instances, there will be no way for you to prevent or significantly reduce the probability of risk occurrence. As a result, reducing risk consequences will be the most effective mitigation strategy to use.

    Once you know that you can do little to prevent a risk from occurring, you will want to develop as many options as possible to reduce the consequences of that risk if it does occur.

    Developing options to prepare for uncontrollable elements such as weather or environmental disasters, increasing the probability of knowing that a risk is occurring, and formulating options to deal with the risk impact after it occurs are all examples of reducing risk consequences.

    While reducing risk probability is seen as more of a preventative approach to mitigation, reducing risk consequences can be described as a backup approach.

    Reducing risk consequences aims to minimize the impact of an identified project risk after its occurrence.

    Proposed risk responses may be put in place before or after a risk's occurrence.
Mitigation is an important strategy in the risk response planning process. Project managers can protect many of their critical project objectives by reducing the probability or consequences of risks identified in the risk identification or risk analysis processes.

As a project manager, you can use mitigation to prevent or minimize the probability and consequences of threatening project risks. This will help you ensure that your project outcomes are completed as planned.

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