The idea behind the Project Risk Management is to identify the Risk and quantifying based on the likelihood and Impact. Once this major task is done, the next part is determining the risk response or how the project team wants to handle this. Everything is part of organization’s Risk Appetite and also inline with organization’s defined Risk Strategies.
For further reading on Risk Responses, please check Project Risk Analysis and Management.
One of the important Risk Response Strategy is Transfer.
What is Risk Response Strategy – Transfer ?
Transfer is nothing but as the name suggests to pass the risk to other party or person. Which does not mean the risk is being eliminated or avoided rather it passes the responsibility to other party.
Let’s see the below scenario.
One of the task in a project to shift the office to a low cost area. The business reason behind is during an assessment it is found office shifting will save significant amount of money which can be utilized in advertisement of newly launched product to generate a good amount of revenue (which is already calculated to start the project).
Now during the risk assessment phase it is observed the road condition to shift the goods is poor which can damage the office furniture. There were two options came during discussions/ brain storaming.
- To stop the project – Which was rejected.
- Continue the project but Transfer the Risk.
So as a decision to continue the project an Insurance was done for transferring the furniture.
Other ways to support the Risk Transfers are considering the options like Fixed Price Projects, Bonds, Performance bonus etc.
We will discuss the other Risk Responses in the next few write-ups.