Mike is the project manager of the NNP Project for his organization.
He is working with his project team to plan the risk responses for the NNP Project.
Mike would like the project team to work together on establishing risk thresholds in the project.
What is the purpose of establishing risk threshold?
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A. B. C. D.D.
Risk threshold helps to identify those risks for which specific responses are needed.
Sure, I'd be happy to provide you with a detailed explanation of the purpose of establishing risk thresholds.
Risk thresholds refer to the level of risk that an organization is willing to accept before taking action to mitigate or avoid the risk. In project management, establishing risk thresholds involves determining the acceptable level of risk for specific project objectives, such as cost, schedule, quality, or scope.
The purpose of establishing risk thresholds is to provide guidance to the project team on how to respond to risks that exceed these thresholds. By establishing risk thresholds, the project team can identify those risks that require specific responses and allocate resources appropriately.
For example, if the risk threshold for cost is set at 10% over budget, the project team would take action if the risk of cost overruns exceeds this threshold. This action may include revising the project budget, identifying cost-saving measures, or adjusting project scope to bring the project back within budget.
Establishing risk thresholds also helps the project team prioritize risks and focus resources on the most critical risks. The project team can use risk thresholds to determine which risks require immediate attention and which risks can be monitored or managed with less urgency.
Furthermore, establishing risk thresholds can help the project team communicate effectively with stakeholders about the level of risk associated with the project. By establishing clear risk thresholds, the project team can provide stakeholders with a transparent and objective view of the project's risk profile, which can help build stakeholder confidence and support.
In summary, the purpose of establishing risk thresholds in project management is to provide guidance to the project team on how to respond to risks that exceed acceptable levels. By establishing clear risk thresholds, the project team can identify critical risks, allocate resources appropriately, prioritize risk responses, and communicate effectively with stakeholders about the project's risk profile.