Risk Response Strategies for Project Management - CRISC Exam Preparation

Implementing Risk Response Strategies in Project Management

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Question

Harry is the project manager of HDW project.

He has identified a risk that could injure project team members.

He does not want to accept any risk where someone could become injured on this project so he hires a professional vendor to complete this portion of the project work.

What type of risk response is Harry implementing?

Answers

Explanations

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A. B. C. D.

A.

Risk transfer means that impact of risk is reduced by transferring or otherwise sharing a portion of the risk with an external organization or another internal entity.

Transfer of risk can occur in many forms but is most effective when dealing with financial risks.

Insurance is one form of risk transfer.

Hence when Harry hires a professional vendor to manage that risk, the risk event does not go away but the responsibility for the event is transferred to the vendor.

Incorrect Answers: B: Risk acceptance means that no action is taken relative to a particular risk; loss is accepted if it occurs.

Here Harry is not accepting this risk event; he does not want anyone of his team to become injured so he's transferring the event to professional vendor.

C: Mitigation are actions that Harry's project team could take to reduce the probability and/or impact of a risk event.

D: Avoidance removes the risk event entirely either by adding additional steps to avoid the event or reducing the project scope.

Harry is implementing the risk response of Transference. Transference involves shifting the responsibility for managing the risk to a third party, typically through the use of contracts, insurance, or warranties. In this case, Harry has identified a risk of injury to the project team members and has decided to transfer the risk to a professional vendor by hiring them to complete the portion of the project work that presents the risk.

By transferring the risk, Harry is essentially outsourcing the responsibility for managing the risk to the vendor. If an injury occurs, the vendor would be responsible for any resulting damages or costs, rather than Harry's project team. This can be an effective risk response strategy for risks that cannot be avoided or mitigated, or when the cost of managing the risk in-house is too high.

It's important to note that while transference can be an effective risk response strategy, it does not eliminate the risk altogether. There is still a possibility of injury, and Harry should ensure that the vendor he hires has the necessary expertise and resources to manage the risk effectively. Additionally, Harry should consider the cost of transferring the risk, as outsourcing the work to a vendor may be more expensive than managing the risk in-house.