SAB10#126_Types_of_Contingency

SAB10#126_Types_of_Contingency

1. Residual Risks

   • These are the risks that remain after risk response planning. So after you have avoided, exploited, mitigated, enhanced, transferred, shared, and actively accepted risks (and created related contingency plans and fallback plans), there will still be some risks that remain. Those residual risks that are passively accepted should be properly documented and reviewed throughout the project to see if their ranking has charged.

2. Contingency Plans

   • Contingency plans are plans describing the specific actions that will be taken if the opportunity or threat occurs.

3. Fallback Plans

   • These plans are specific actions that will be taken if the contingency plans are not effective. Think how prepared you will feel if you have plans for what to do if a risk occurs and what to do if the original plan does not work.

4. Risk Owners

   • A key concept in risk response planning is that the project manager does not have to do it all and neither does the team. Each risk must be assigned to someone who may help develop the risk response and who will be assigned to carry out the risk response or “own” the risk. The risk owner can be a stakeholder other than a team member. Think about how the application of risk management can change real world projects. The risk occurs; the risk owner takes the preapproved action determined in project planning and informs the project manager. No meeting is needed just action! This can be very powerful.

5. Secondary Risks

   • Any new risks created by the implementation of selected risk responses should also be analyzed as part of risk response planning. Frequently, a response to one risk will create the possibility of new risks that would otherwise not have occured. For example, if a portion of the project work is outsource to a seller because the project team does not have the expertise to complete the work efficiently, there may be a secondary risk of the seller going out of business. This was not a risk to the project prior to outsourcing. The discovery of secondary risks may require additional risk response planning.

6. Risk Triggers

   • These are events that trigger the contingency response. The early warning signs for each risk on a project should be identified so risk owners know when to take action.

7. Contracts

   • A project manager must be involved before a contract is signed. Before the contract is finalized, the project manager should have completed a risk analysis and included contract terms and conditions required to mitigate or allocate threats and to enhance opportunities. Any contract issued to deal with risks should be noted in the risk register.

8. Reserves (Contingency)

   • Having reserves for time and cost is a required part of project management. You cannot come up with a schedule or budget for the project without them.