Exam 8: Project Risk Management Planning

Correct Answer:

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The reasons to perform risk management planning are as follows: (based on DeMarco and Lister, 2003)
• Risk management makes aggressive risk-taking possible-An organization operating from a position of knowledge, with mitigation strategies in place, can afford to be more aggressive and take on a higher level of risk.
• Risk management decriminalizes risk-It allows an honest and open evaluation of risk to occur, without fear of being labeled as a negative thinker or thought of as being against the successful completion of the project.
• Risk management sets up projects for success-It provides a clear understanding of what is possible within normal operating procedures and what might be a stretch to achieve.
• Risk management bounds uncertainty-It helps a project team understand what it doesn't know (known unknowns).
• Risk management provides minimum-cost downside protection-Armed with the knowledge of each risk's impact and likelihood, the team can develop an accurate justification for the amount of money and time to be spent on mitigation strategies.
• Risk management protects against invisible transfers of responsibility-An element of the risk register is the identification of who owns each risk. Risk management identifies each stakeholder's share of the identified risks (customer, vendor, project team, and so on) to allow a conscious effort on the part of the project team to understand who has what risks and who should have the risks that make the most sense for the success of the project and stakeholder.
• Risk management can save part of a failed effort-The key here is to not let the failure of a part of a project destroy the whole project.
• Risk management maximizes opportunity for personal growth-Organizations exposed to bad projects can tend to become risk adverse, from then on taking on only small, simple projects offering little benefit or job growth for the participants.
• Risk management protects management from getting blindsided-As mentioned in Chapter 7, in project management, no one likes surprises.
• Risk management focuses attention where it is needed-The objective is to utilize resources (human and monetary) where they are needed most to benefit the project and organization.