Risk Response Matching
Risk Response Matching
From the scenario, this discussion examines two types of risk responses as outlined in Kerzner's project management guidelines: risk mitigation and risk acceptance. Risk mitigation involves implementing strategies to reduce the probability or impact of a risk. For example, in a national infrastructure project such as building a high-speed rail network, risk mitigation could involve adopting advanced construction technologies or selecting reliable contractors to prevent delays or structural failures. This proactive approach is appropriate when risks have high potential impacts and manageable mitigation strategies, thereby minimizing unforeseen disruptions and controlling project outcomes effectively.
Conversely, risk acceptance entails acknowledging a risk without attempting to reduce it, often because the cost or effort of mitigation outweighs the potential impact. This response suits situations where the risk's probability and impact are low or when the potential fallout is deemed acceptable within the project's overall risk tolerance. For instance, in a municipal project involving minor aesthetic modifications, accepting the risk of minor delays or budget overruns may be rational. Here, a real-world example can be found in small-scale urban beautification initiatives where risks of slight project delays are tolerated to prioritize quicker implementation or cost savings.
Determining Trade-Off Problems in Projects Today
Modern projects face complex trade-off challenges characterized by competing constraints such as quality, project image, risk, reputation, goodwill, and legal liability. Balancing these factors requires careful decision-making to optimize project success while minimizing adverse consequences. For example, prioritizing cost savings may compromise quality, leading to potential safety issues or legal liabilities, as seen in construction scandals where cutting corners resulted in building collapses and lawsuits. Similarly, sacrificing project quality for speed can damage organizational reputation and goodwill among stakeholders. Quality management standards like ISO 9001 emphasize the importance of maintaining high standards despite cost or schedule pressures.
Maintaining a positive project image and safeguarding reputation often involve ensuring legal compliance and risk management, particularly when stakeholder trust is at stake. An example is the Volkswagen emissions scandal, where illegal manipulation of emission tests damaged the company's reputation and led to legal actions. Therefore, project managers must continuously evaluate and balance these constraints, emphasizing strategic risk management and stakeholder engagement to achieve sustainable project success amid these often conflicting priorities.
References
- Kerzner, H. (2017). Project Management: A Systems Approach to Planning, Scheduling, and Controlling. Wiley.
- PMI. (2017). A Guide to the Project Management Body of Knowledge (PMBOK® Guide), 6th Edition. Project Management Institute.
- Snyder, L. V., & Shen, W. (2017). Fundamentals of Supply Chain Theory. Wiley.
- Harrison, F. (2020). Risk Management in Construction Projects. Journal of Construction Engineering and Management, 146(2), 04020008.
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- ISO. (2015). ISO 9001:2015 Quality Management Systems. International Organization for Standardization.
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- Lucas, H. (2018). Legal Risks in Construction Projects. Construction Law Journal, 34(2), 158–165.