Risk Mitigation Strategies

Risk Mitigation Strategies

There are four risk response strategies used in project management: Accept, Transfer, Mitigate, and Avoid. After identifying risks on your project, evaluate each one against these four strategies to develop a response plan that minimizes potential impact.

Accept the Risk

Accepting a risk means acknowledging it may occur without taking active steps to prevent it. This strategy is best suited for risks with a low likelihood and low impact. To prepare financially, you can carry a budget allowance or draw from your contingency reserve if the risk materializes.

Transfer the Risk

Risk transfer involves shifting the financial or legal responsibility for a risk to a third party. One common way to transfer risk is to purchase insurance, which transfers the risk to the insurance company. For example, if you are performing work near railroad tracks, you can purchase railroad protective liability insurance to cover the risk since this is typically excluded in most general liability insurance policies.

Mitigate the Risk

Risk mitigation involves taking proactive steps to reduce the likelihood or impact of a risk before it occurs. For example, if the specified generator has a six-month lead time that doesn't work with the schedule, consider using another manufacturer with a shorter lead time to mitigate the risk to the schedule.

Avoid the Risk

Risk avoidance means changing your project plan to eliminate a risk entirely. For example, instead of building during the rainy season, you can schedule work during drier months to remove the risk of weather-related delays.