Risk Strategy Responses for PMP Exam

hello and welcome to exams PMS PMP exam tip series in this video we are going to cover the risk response strategies that you need to know for your upcoming PMP exam and if you haven't done so already be sure to sign up for a one half hour free course at WWE exams p.m. comfrey where I will break down the exact strategies that you need to follow in order to clear your PMP painlessly in the next six weeks okay now let's get started with our risk response strategies now first of all we need to discuss what is a risk a risk is an uncertainty event that may or may not happen in the future so there's uncertainty around it if the risk actually became a reality on your project and that's called an issue now there are two types of risk that you may encounter on your project the first type is a threat these are also called negative risk so threats can hinder your project success or completion you want to avoid and mitigate the impact of threats on your project on the flip side we have opportunities opportunities are also called positive risk so these opportunities can help your projects save cost reduce your schedule create other benefits as well and you want to increase the probabilities of these opportunities happening on your project now in the PMBOK guide there are five strategies listed to help you handle threats and handle opportunities you need to manage both threats and opportunities on your project v5 strategies to manage threats are transfer avoid mitigate escalate and accept now let's take a closer look at all five of these strategies because you do need to know them for your upcoming PMP exam the first one is to avoid this is the best strategy to manage risk if it's an available option to you so here you avoid the risk by changing your scope your plan or your schedule you use this risk when the risk is critical and your sponsor or your client really doesn't want this risk to occur let's look at an example of an avoid risk strategy let's suppose that the government in your local city is going to hold an election between May 5th may 10th therefore you schedule your activities outside of this period in order to avoid clashing with the election dates this is an example of the avoid risk response strategy because you change through a schedule to keep your project activities from clashing with the election now let's take a look at a second risk mitigation strategy which is to mitigate and B mitigate risk response strategy you try to minimize the probability of the risk occurring and its impact that it will have on your project so let's take a look at an example there are certain supplies that you will need for your project and may not be easily available during the peak season of your project therefore what you do is you contact a few suppliers you negotiate a contract to get these supplies at a predetermined price that you both agreed on and at the predetermined rate so here if the supplies do become cheaper then you will still have to pay the predetermined price but if let's say there is currency fluctuations and that supply becomes much more expensive you still get it at the predetermined rate that's agreed upon in your contract so this risk response strategy only reduces the probability or the impact of that risk after developing the responses there will still be a residual risk which you still need to monitor and we'll talk about residual risk in just a little bit the third risk mitigation strategy is to transfer the transfer risk response strategy is used when you cannot manage the risk on your own so for example you may be lacking the resources skills where you just does eat with other activities so here the management of the risk is transferred to a third party so if the risk does occur they are responsible from managing it so insurance policy is a great example of a risk risk response strategy so here you purchase the insurance policy and therefore you transfer that risk into a third party in exchange for a fee so please know that this strategy can cause a secondary rest to you so for example though you ask the third party to manage the risk you are still responsible for the guarantee with the client okay our fourth risk response strategy is to escalate this risk response is used when you lack the authority to manage the risk so here you approach your PMO you were your project management office or your management team to help you manage the risk once they agree that the management of the risk will be transferred to them your responsibility is just limited to monitoring it so here is an example the government is planning a regulation and if it is approved it could significantly negatively impact your project you have no legal advisors or other resources to manage this risk on your project so this is kind of beyond your scope of management however since this risk will still have an impact on your project you need to manage it therefore you approach your management team to help you manage this risk so so you are the project manager dealing with an issue that's beyond your capabilities here you don't have access to the legal advisers to advise you and you don't have the power to implement a solution therefore you escalate this risk and pass it on to your management team that will help you approach and assess and manage this risk accordingly in the last risk response strategy the fifth one we will discuss is to accept in the accept risk response strategy you take no action except to acknowledge it so you just accept that the risk exists and if it happens you will deal with it there are two different types of acceptance so there's passive acceptance and active acceptance so in active acceptance you will keep and contingency reserve to manage the risk if it does occur whenever you're doing your budgets you always want to add on a contingency reserve reserve for known unknown risk that may occur and passive acceptance is you noted in your risk register and you take no further actions you don't even keep a contingency reserve in case that risk does occur generally this strategy is used for non-critical risk that are in your risk register now after you have implemented your risk response plans sometimes there will be a secondary risk also called a residual risk so this is a risk that still remains after you have implemented your risk strategy so for example let's say that you are managing a construction project and there is a chance of rain that may last for two hours therefore you create a contingency plan to help you manage this risk however what if that rain lasts for more than two hours now you must analyze a situation and create a fallback plan to manage this residual risk this is a risk that still remains after you have already implemented your contingency plan another type of risk is called the secondary risk so the secondary risk arises after you have already implemented your risk response plan so sometimes after you implemented your risk response plan this would trigger more risk to occur and these risk occur because you have implemented your risk response plan is called your secondary risk now that we covered the five strategies to deal with threats or negative risk now let's turn on the positive side and let's take a look at the five strategies that you can use to help you manage your opportunities on your project so on a high level these five strategies to manage opportunities are enhanced exploit escalate share and accept now let's dive into more details about each of these five strategies starting with enhanced in this risk response strategy you increase the chances of the opportunity happening so there is an increased chance that you will be able to realize it on your project this is the opposite of the mitigate risk strategy that we looked at earlier which reduces the probability of this risk happening so let's say that your project will be completed in three months from now and you find out that an organization is about to release a similar project in two months so if you're able to finish your current project in two months you'll be able to get this new project so this is an opportunity for you therefore you compress the schedule of the current so that you can finish ahead of time so that you will have a chance to bid on the new project here you're using the enhanced risk strategy you want to enhance and increase the probability of realizing this new opportunity the second type of risk response strategy for opportunities is to exploit in the exploit risk response strategy you make sure that the opportunity or the positive risk is realized this response strategy is oppositely avoid risk management strategy where you ensure that the risk do not occur at all in other words when you're exploiting the opportunity you're doing everything you can in order to make sure that this opportunity can be realized for your project next up we have escalate so you will use this risk response strategy when there is an opportunity for you on your project but you can't realize it because you don't have the power to so in order to realize this opportunity you need to escalate it you need to approach your management team or your PMO office and that you will have them to agree to manage this opportunity for you you know order for you to realize this opportunity for your project though even though when you escalate it it is still your job to monitor this this opportunity or positive risk for your project so let's take a look at an example if you team up with another project team from a big organization you can jointly bid for a project however you don't have the authority to contact this other organization and you simply don't have all the resources available on your project team right now to seal this deal so you ask your management team to approach them and make the arrangement this is an example of the escalate risk response strategy because here you don't have the authority or the communication channel to speak to the head of the other organization to negotiate and seal the deal therefore you escalate the issue to your management and they will take care of it our next risk response strategy is accept the accept risk response strategy can be used with both types of risk positive or negative here you're just taking no action and if the positive risk where the opportunity occur you will benefit from it if it doesn't we're not doing anything in order to realize it so you will use this strategy when the cost of the response is high and there is small chance of it occurring where the benefit just doesn't really outweigh the effort involved to make sure that it is realized so let's take a look at an example you know that supplier may have spare equipment that you can use for your project for a short period of time at a low price since there is no guarantee that you will need this equipment you don't take any action this is an example of the accept or risk response strategy because here you don't take any action in order to realize the opportunity when it comes time that you may need this equipment you approach the supplier and ask them if you can borrow it at that low price for a short period of time it's available you'll take it and if it's not you will just have to pay whatever the market price it is for that and they're our last risk response strategy for opportunities is to share so in the shared risk response strategy you will invite or join someone else in order to realize the opportunity together because perhaps you don't have the ability to realize it on your own so let's take a look at an example due to the lack of expertise you're not able to bid for a subset construction project but your management team really wants this project in order to expand their portfolio therefore you decide to team up with another company that has experience in these areas that you your company currently lacks and jointly bid for this project so in this example you are using the share risk response strategy because you're sharing the opportunity with another partner okay now let's take a look now let's summarize everything that we have learned so far during this video let's take a look at the key points for threats a you need to know for your exam and the key points for opportunities so let's start off with the threats so if the negative risk is critical you want to use the avoid risk response strategy if you are able to decrease the impact of the risk to an acceptable level then you can use the mitigate risk response strategy be sure to also have a fallback plan for the residual risk I still after you have implemented your risk responses and if you cannot manage the risk on your own you want to transfer it to a third party such as insurance policy usually the company will take a fee in exchange for managing the risk for you and lastly if the managing the risk is beyond your capabilities you want to escalate this risk response strategy to your management team okay now let's take a look at the key points for opportunities you can accept the risk response strategy when the risk is not very important or if it's just too costly to implement the response if you want to realize an opportunity you will use in the hence risk response strategy in order to increase the probability of that risk or opportunity from happening if you want to make sure that the opportunity is realized a hundred percent you want to use the exploit risk response strategy and lastly if you want the opportunity but you can't go about it on your own you'll want to use a share risk response strategy so that's just a quick overview of everything that we covered so far if you like this video if you learn something here please something for a free training where you will learn exactly how you can pass your PMP certification in the next six weeks you sign up to sign up just go to www.imtcva.org

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Keywords: pmp exam tip, pmp certification, risk response strategy, risk strategy response, risk response plan, examspm

Id: atwqdcuULoM

Length: 14min 49sec (889 seconds)

Published: Tue Sep 03 2019