Managing Hardware Work Risks

A.

When you are hiring a third party to own risk, it is known as transference risk response.

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.

Incorrect Answers: B: The act of spending money to reduce a risk probability and impact is known as mitigation.

C: When extra activities are introduced into the project to avoid the risk, this is an example of avoidance.

D: Exploit is a strategy that may be selected for risks with positive impacts where the organization wishes to ensure that the opportunity is realized.

The risk response of hiring a company to deal with all hardware work on a project is an example of "Transference."

Explanation:

Risk response planning is the process of developing options, selecting strategies, and taking actions to enhance opportunities and reduce threats to project objectives. There are four primary risk response strategies or options to consider after identifying a risk. These are Avoidance, Mitigation, Transfer, and Acceptance.

• Avoidance: This response strategy involves changing project objectives or plans to eliminate the risk or protect the project objectives from its impact.
• Mitigation: This response strategy involves reducing the probability or impact of a risk event.
• Transfer: This response strategy involves shifting the ownership or impact of a risk to a third party, typically through a contract, insurance, or warranty.
• Acceptance: This response strategy involves acknowledging the existence of a particular risk, without taking active steps to address it.

In the given scenario, the project manager decided to hire a company to deal with all hardware work on the project. By doing so, the project manager has transferred the responsibility for managing the hardware risk to the hired company. Hence, the response strategy used here is "Transference."

The transference strategy is often used when the cost of managing the risk is too high or the risk cannot be mitigated effectively. By transferring the risk to a third party, the project manager can reduce the impact on the project if the risk event occurs, as the third party would bear the cost of managing the risk. However, it is essential to ensure that the third party has the necessary expertise, experience, and resources to manage the risk effectively.