Project Management Professional (PMP)® Examination Content OutlineProcessMedium
A project manager is leading a project to upgrade an organization's IT infrastructure. During the planning phase, the team identifies a potential risk: a critical vendor might fail to deliver specialized hardware on time, which could delay the entire project by several weeks. The project manager wants to implement a proactive strategy to reduce the probability or impact of this risk. Which of the following is an example of a 'risk mitigation' strategy?
- ADeveloping a contingency plan to use an alternative, readily available hardware if the primary vendor fails.
- BAccepting the risk and documenting it in the risk register without further action.
- CTransferring the risk to an insurance company by purchasing a project delay policy.
- DInsisting on a penalty clause in the contract with the critical vendor for late delivery.
Show answer & explanationAnswer & explanation
Correct answer: A. Developing a contingency plan to use an alternative, readily available hardware if the primary vendor fails.
Risk mitigation aims to reduce the probability or impact of a negative risk event. Developing a contingency plan to use alternative hardware directly reduces the impact of the vendor's late delivery, making it a mitigation strategy. A penalty clause is a form of transference, accepting the risk is not proactive, and insurance is also transference.
Why the other options are wrong
- B. Accepting the risk is a valid response, but it's not a proactive mitigation strategy; it's a decision to take no further action.
- C. Purchasing insurance is a classic example of risk transference, moving the financial burden to a third party.
- D. A penalty clause is a form of risk transference, as it aims to shift the financial consequence of the risk, not reduce its probability or impact.
Risk Mitigation
A risk response strategy that aims to reduce the probability of a negative risk event occurring and/or reduce its impact if it does occur.
- Involves taking proactive steps to lessen risk exposure.
- Focuses on reducing either likelihood or consequence.
- Examples include testing, prototyping, redundant systems, or alternative plans.
Memory trick: Dodge the bullet, build a shield, or pass the burden to another field.