Monday, January 26, 2009

Primary Risk Response Planning Outputs

As a project manager, you will often face sudden or unexpected risks—risks that were not identified or prepared for during risk response planning. The best way to respond to these kinds of risks is to monitor and try to control them by examining the primary risk response planning outputs.

In addition to the risk response plan, there are four primary risk response planning outputs that you can use to ensure successful project completion: residual risks, secondary risks, contractual agreements, and contingency reserve amounts.
  • residual risks
    The first output that will result from your project's risk response planning process is residual risks. These are the risks that remain after avoidance, transference, and mitigation responses have been implemented.

    Residual risks also include any minor risks that have been accepted and addressed during risk response planning through the addition of contingency amounts to the project budget or schedule.

  • secondary risks
    The second output that will result from your project's risk response planning process is secondary risks. These are risks that arise as a direct result of implementing a risk response.

    Secondary types of risks should be identified as soon as possible so that appropriate and effective risk responses can be planned. For example, due to the complexity and detail involved in most projects, it is possible that adding personnel resources to address one identified risk may result in a risk of cost or schedule overruns in another project phase.

  • contractual agreements
    Another risk response planning output that is useful in promoting project success is contractual agreements. These types of agreements help to ensure that all parties involved in a project's development are aware of their responsibilities and bound by law to fulfill all agreed-upon commitments.

    A contract is typically defined as a mutually binding agreement that obligates a seller to provide a specified product and requires a buyer to pay for it. As a result, contractual agreements are essential to risk management.

    Contractual agreements are also used to help specify each party's responsibility for specific risks. For example, a contract between an insurance provider and a company will detail the insurance provider's responsibility to pay out a certain amount of money to the company in the event that an insured risk occurs. Contractual agreements, as an output of risk response planning, will help you be confident that specific identified risks will be responded to in a timely and efficient manner.

  • contingency reserve amounts
    The final output that results from your project's risk response planning process is contingency reserve amounts. These reserve amounts are over and above the estimated amount of time and resources allotted for a particular project. These additional resources are set aside to help reduce the risk of overruns to project objectives as a result of risk.

    Contingency reserve amounts will help you lower potential overruns to a level that is acceptable to your project stakeholders.

    Contingency reserve amounts are usually determined by the project manager with the aid of the project's established risk thresholds and probabilistic analyses. These analyses are used to forecast potential project schedule and cost results.
As a project manager, it is important to remember that almost every risk response will have a corresponding effect. Most risk responses involve expenditures of additional time, cost or resources and therefore require changes to the project plan. The results of the risk response planning process must be incorporated into the project plan to ensure that agreed actions are implemented and monitored as part of the ongoing project.

Other risk response planning outputs contribute to project success. You will want to use them to ensure that your project is protected from threatening project risks and prepared for the risk monitoring and control process.

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