Project Management Professional (PMP)® Examination Content OutlineProcessMedium
A project manager is leading a project to develop a new cloud-based data analytics platform. During the planning phase, the team identifies a potential risk: a critical third-party API provider might discontinue their service, which would severely impact the platform's functionality. The project budget does not allow for developing an in-house alternative. What is the BEST risk response strategy for the project manager to employ in this situation?
- AAvoid the risk by redesigning the platform to eliminate the dependency on the third-party API.
- BTransfer the risk by purchasing insurance that covers service discontinuation.
- CAccept the risk, as developing an in-house alternative is not feasible.
- DMitigate the risk by developing a contingency plan that outlines steps to switch to an alternative API provider if needed.
Show answer & explanationAnswer & explanation
Correct answer: D. Mitigate the risk by developing a contingency plan that outlines steps to switch to an alternative API provider if needed.
Since avoiding the risk is not feasible (due to budget constraints for redesign), and transferring might not be fully effective or available, mitigation is the best approach. Developing a contingency plan to switch providers reduces the impact if the risk occurs, making it a proactive mitigation strategy.
Why the other options are wrong
- A. Avoiding the risk by redesigning is ideal but explicitly stated as not feasible due to budget constraints.
- B. Transferring the risk through insurance might cover financial losses but won't address the functional impact or project delays. It's often not a complete solution for operational risks.
- C. Accepting the risk without a plan for its occurrence is risky, especially given the severe impact. It's only suitable if other options are not viable and impact is low.
Risk Mitigation
A risk response strategy that aims to reduce the probability of a risk event occurring or to lessen its impact if it does occur.
- Involves taking proactive steps to reduce risk exposure.
- Examples include contingency plans, testing, redundancy, or training.
- Often a compromise when avoidance or transfer are not fully possible or desirable.
Memory trick: Avoid, Transfer, Mitigate, Accept – choose wisely, or your project will be upset.