Mitigating Delayed Equipment Delivery
Question
You are the project manager of GHT project.
Your hardware vendor left you a voicemail saying that the delivery of the equipment you have ordered would not arrive on time.
You identified a risk response strategy for this risk and have arranged for a local company to lease you the needed equipment until yours arrives.
This is an example of which risk response strategy?
Answers
Explanations
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A. B. C. D.D.
Mitigation attempts to reduce the impact of a risk event in case it occurs.
Making plans to arrange for the leased equipment reduces the consequences of the risk and hence this response in mitigation.
B: 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.
Here there no such action is taken, hence it is not a risk transfer.
Incorrect Answers: A: Risk avoidance means to evade risk altogether, eliminate the cause of the risk event, or change the project plan to protect the project objectives from the risk event.
Risk avoidance is applied when the level of risk, even after the applying controls, would be greater than the risk tolerance level of the enterprise.
Hence this risk response is adopted when: -> There is no other cost-effective response that can successfully reduce the likelihood and magnitude below the defined thresholds for risk appetite.
-> The risk cannot be shared or transferred.
-> The risk is deemed unacceptable by management.
C: Risk acceptance means that no action is taken relative to a particular risk; loss is accepted if it occurs.
If an enterprise adopts a risk acceptance, it should carefully consider who can accept the risk.
Risk should be accepted only by senior management in relationship with senior management and the board.
There are two alternatives to the acceptance strategy, passive and active.
-> Passive acceptance means that enterprise has made no plan to avoid or mitigate the risk but willing to accept the consequences of the risk.
Active acceptance is the second strategy and might include developing contingency plans and reserves to deal with risks.
The risk response strategy being demonstrated in this scenario is the "Transfer" strategy. This strategy involves transferring the risk to a third party or mitigating its impact by purchasing insurance or outsourcing the project.
In this scenario, the risk is the delay in equipment delivery, which could have a negative impact on the project schedule and overall progress. To mitigate this risk, the project manager identified a local company that could provide leased equipment until the ordered equipment arrives. By doing so, the project manager has transferred the risk of equipment delay to the local company, which is now responsible for providing the equipment on time.
The "Avoid" strategy involves eliminating the risk entirely by changing the project's scope or approach. The "Acceptance" strategy involves accepting the risk and its potential impact on the project. The "Mitigate" strategy involves reducing the likelihood or impact of the risk by taking proactive measures.
In summary, the project manager's decision to arrange for leased equipment from a local company until the ordered equipment arrives is an example of the "Transfer" risk response strategy. This strategy involves transferring the risk to a third party or mitigating its impact by outsourcing the project or purchasing insurance.
