Plan Risk Response - "ACCEPT" as a strategy for Positive Risk as well as Negative Risk
Aejaz ShaikhPM I| Alyx Technologies India Pvt LtdPune, Maharshatra, India
Plan Risk Response - "ACCEPT" as a strategy for Positive Risk as well as Negative Risk.
Accept as a strategy for Positive Risk as well as Negative Risk, Is this the same strategy or they different strategy. Please explain with some real life examples. Saving Changes...
Such as entering country like Iraq: The country has issues with security, government stability, political issues, conflicts, currency devaluation, oil price impact and so on.
The reality is: Many international companies are still operating. Whether they are actively interested in investing further, it depends on the company strategy and political disposition.
However, at the same time, companies take risk response plans such as higher security set up and costs, higher insurance or other such risk mitigation measures. After all such measures, in reality, Companies are still exposed to residual risks or new risks due to changing geopolitical, economical reasons. Under such conditions, one of the choice is ACCEPT strategy.
For example, with the lower crude oil price, the income to Iraq government reduced but the funds outflow remains the same, as before crude oil price fall. However, the same fund flow cannot be maintained due to continued fall in inflow. Under such situations, Companies which are already invested, can only negotiate for reimbursement and can at best put ON HOLD further investment, until the previous investment is recovered. Saving Changes...
Sergio Luis ConteHelping to create solutions for everyone| Worldwide based OrganizationsBuenos Aires, Argentina
ACCEPT is a strategy for negative risk only. Is not for positive risk. Possible strategies are Avoid, Mitigate, Transfer, Accept. ACCEPT is the recomendable strategy for high probability low impact risk. Those risk are known like "puppies": they can be dangerous when grow so you have to monitoring how they evolve. For positive risks possible strategies are Explore, Sharing or Leverage. Explore is about you have detected de oportunity and you will get more information about you are able to take it or not. Sharing is you have detected the opportunity and you will make some type of joint venture with other company to go together to get it. Leverage is you are able to take the opportunity and you will make actions to make the opportunity better for you (short the opportunity window, make the opportunity more valuable, etc) Saving Changes...
Satish SharmaCertified SAP S4Hana 1909 Financials Expert| FreelanceNew Delhi, India
I had worked on a project for a steel manufacturer which has a niche line of business of which product was so discrete it was very difficult to devise an optimum project plan with all possible combinations as the material was heavily configurable and every possible combination was altogether new product. When we started the project we knew the issue and it was an accepted risk, which was well notified to the client project management team and implementer team from the very onset of the project.
As a mitigation response we started devising a custom solution knowing that with the best available tools in SAP could not offer the right fit. Doing like this we some how managed the requirement and blueprinting phase with a known risk but ended up taking more time in solution design then implementing the same.
Yes I agree with Sergio, that ACCEPT is applicable to negative risk as it is an affirmation and move on to a future action. Saving Changes...
Accept is a valid strategy for positive risks (see page 346 of PMBOK5). Accept is basically the same whether the risk is positive or negative: you agree that the event may happen but you will not do anything to change its probability or impact. Saving Changes...
Risk acceptance strategies for both negative and positive future events might be used for the risks of which possibility and / or impact should not be significant.
For example, in a construction project, we can take acceptance for the risks slightly delaying the project due to rainy period. If we can incorporate some resources as contingency reserves into the plan to deal with adverse impacts of rainy period, we can call it active acceptance. If we can't practically incorporate into the plan but simply decide to deal with the rainy days when they come without prior set up contingency reserve, we can call it passive acceptance. In general the passive acceptance should be applied only for the negative risks of which impacts are not practically foreseen and it is not efficient to include the contingency reserve in the plan in advance.
For the opportunity, we can accept the future event that local government might change the regulations and we expect it might favor the project costs but not that much. If we can expect the change of regulation by the local government is so favorable to reduce the significant project costs we might choose "exploit" or "enhance" as the positive risk strategy. Saving Changes...
Acceptance is a common strategies for Threats and Opportunities according to PMBOK.
It is for low risk has pointed out by Sergio, It is the only option for Unknown-Unknown, it is the choice of dealing with the risk when it occurs. It is normally cover with a general contingency.
Not that this is not ignoring risk Saving Changes...
Aejaz ShaikhPM I| Alyx Technologies India Pvt LtdPune, Maharshatra, India
Thanks All for the examples. Saving Changes...
Seema SonkiyaHead Business Analysis Practices, PMI-PBA trainer| iZenBridge Consultancy Private LimitedJaipur, Rajasthan, India
I do agree with Vincent and Sungjoon. Accept is the risk response strategy both for negative and positive risks. Example for 'Accept' positive risk response strategies: You are just keeping an eye on opportunities but not taking active actions. Like you are working in a particular technology, and keep monitoring it but when it change, you adopt it to take the advantage and may result in a cost saving. In conclusion, the team does not take any action until the opportunity knock the door. Example for 'Accept' negative risk response strategies:In this case, either team does not take any action till the risk occurs or design a contingency reserve including amounts of time, money, or resources to handle the risks as it occur.
Saving Changes...
AWAD ALIBRAHIMsaudi consulting service companyAlahsa, 04, Saudi Arabia
there is a confusion about from where we fund risks passively accepted , it is not clear in pmbok. is it from contingency reserve or from management reserve ?
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1 reply by Kiron Bondale
Dec 10, 2020 8:08 AM
Kiron Bondale
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Awad -
Contingency reserves should be used to offset the financial or schedule impact of identified risks, even the accepted ones. Management reserves are usually there for true unknown-unknowns or for broader risks which would impact the overall organization's portfolio.
there is a confusion about from where we fund risks passively accepted , it is not clear in pmbok. is it from contingency reserve or from management reserve ?
Awad -
Contingency reserves should be used to offset the financial or schedule impact of identified risks, even the accepted ones. Management reserves are usually there for true unknown-unknowns or for broader risks which would impact the overall organization's portfolio.
