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?
A.
Avoid
B.
Transfer
C.
Acceptance
D.
Mitigate
Explanation:
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.
Answer B is incorrect. 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.
Answer C is incorrect. 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.
Answer A is incorrect. 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.