According to the National Research Council, it is posited that any project can never be risk-proof, and efforts should be enforced to mitigate the same. In its 2005 publication titled The Owner's Role in Project Risk Management, it maintains that the amount of uncertainty in any given project is normally relatively high. Further, the adversity involved in some of the pertinent project risks can be so great such that it is literally impossible to design risk mitigation strategies at the planning stage of a project. In the case where a vendor is underperforming, there is the likelihood of occurrence of various types of risks. Performance, scheduled and cost risks are but a few of these risks. A Performance risk comprises of the type of risk factors that affect the already completed project. In the occurrence of a performance risk, a project nosedives in envisioned performance or does not meet the financial or business requirements that braced its justification. The approaches employed in handling schedule and cost risks are more or less similar for this and all other projects.
However, the procedures for handling a performance risk more or less depends on the focus area. For example, a construction project handled by one party in contract with another party, the contract’s final outcome will largely depend on the project’s performance. Poor workmanship and flaws in structural engineering may render the final project unsafe. What’s more, the procedures for quantifying the associations between dissimilar facets of performance can be challenging. When a vendor is not performing, the best risk response is control, also called mitigation. This type of risk shall employ a bottom-up contingency plan. This implies risk mitigation at the individual work or activity level, advancing outwards. Such a contingency plan does not employ statistical analysis thus an increment in project budget is highly likely. The second case involves late delivery of equipment.
The major risk involved here is a scheduled risk whereby the time that was initially granted to the completion of the project at hand is ‘overdue’. The quickest repercussion of a time overdue is increased cost of the project. The best risk response strategy to employ here would be buffering whereby, formation of a fallback or rather a buffer that is capable of absorbing the effects of using up excessive time with the exception of jeopardizing the project. Since contingencies, also known as risk funds, are disjointed from the rest of the budget funds, the best contingency plan here would be that of availing a fixed cost contract. In this contract, penalties are passed to any party that defaults in their responsibility. Natural hurricanes are an example of a natural disaster. The most conspicuous form of risk faced in this case is an environmental risk. This type of risk has an occurrence trend that is typically unpredictable. It affects the project in a minimally controllable manner since it is the project’s natural surroundings that is at stake. Calamitous environment-based risk consequently induces a robust impression on timeframes of the project as well as its costs. The best risk strategy here is acceptance since little can be done in as far as natural calamities are concerned.
However, preparations towards hurricanes e.g. building fortifications using reinforcements are highly advisable to minimize loss in case of occurrence of a hurricane. Task efforts that take thrice as long as initially expected, pose a scheduled risk. As earlier mentioned, a schedule risk causes a project to take up much more time than initially set. This risk has the central impact on the overall cost of the project. The most convenient risk response here would be avoidance. A contingency plan that involves changing the scope of the project, would be a likely approach. In conclusion, project risk mitigation is as important in a project, as the project’s performance itself. High expectations are only possible in a project if all the loopholes caused by pending risks are properly sealed and taken care of.
References
Cooper, D. F. (2005). Project risk management guidelines: managing risk in large projects and complex procurements.
Council, N. R. (2005). The Owner’s Role in Project Risk Management. Retrieved from The National Academies Press: http://www.nap.edu/catalog/11183/the-owners-role-in-project-risk-management
