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There are several types of risk mitigation strategies that can be used throughout a project. First, risk avoidance is implementing all the precautions to help avoid the risk from happening (4 Great Risk, 2022). You could use extra resources to ensure the risk does not happen. If one of the risks that you have identified from historical data, is that the electrical work normally falls behind schedule. You can request more laborers to be on this project. However, it might cost more money than past projects but as a project manager, you must outweigh the impact of falling behind schedule or spending more money to remain on schedule.

The next type of risk mitigation strategy is risk acceptance. Risk acceptance allows the risk to run its course (4 Great Risk, 2022). Sometimes the risks that are identified dont have a great impact on the project and trying to avoid them would likely cost more money. For example, if your project must be reviewed by the design committee prior to beginning work, it might not be worth spending additional time on the design if all the requirements are met. The risk is low enough that even if they asked you to edit some aspects of the design it wouldnt cause significant problems in your project.

Another type of risk mitigation is risk reduction. Risk reduction is taking additional steps to reduce the risk of happening. Risk reduction could also be reducing the impact caused in the event the risk happened (4 Great Risk, 2022). For example, one risk that has been identified in the risk plan is not being able to get materials. Since the project is a few months away from needing materials, you start acquiring common materials that might be hard to get once the project starts. This reduces the risk of not being able to get the materials later.

The final type of risk mitigation is risk transference. Risk transference is transferring the risk to another party involved in a project (4 Great Risk, 2022). Large commercial construction projects sometimes require performance bonds or other types of bonds. A bond is additional insurance purchased to guarantee the work will be performed according to the specifications. In the event the contractor fails to meet expectations, the bond will compensate the company who hired the contractor (Setiawan, 2009). Requiring bonds on large contracts helps reduce the risk and ensures the project will be completed one way or another.

Transferring the risk does come with additional costs. However, if your company has employees there are certain types of insurance that should be carried to cover unexpected expenses in the event of an accident or injury. Workers compensation insurance covers the medical expenses if someone is hurt on the job. General liability insurance is another type of insurance that covers expenses if there is a problem on the job (Metz, 2022). If you improperly perform a task on a project that leads to mold, your company could be liable for the expenses to mitigate the damage. Medical expenses or property damage could ruin a company if the proper insurance isnt carried. Even though these types of insurance can be expensive, is it worth the risk not carrying them in the event something happens?

Article 2

1. Describe the features of each type of risk mitigation strategy mentioned above.

2. Illustrate your descriptions with an example that demonstrates the use of the features you have described.

3. Transferring risk to the other party usually involves extra cost. How can you determine if the extra costs are worth it?

Avoidance is a risk mitigation strategy that eliminates risk altogether. Risk can be averted by avoiding the activity that triggers the risk. An example of avoidance is provided by ScienceDirect, If you want to avoid the risks associated with the ownership of property, then do not purchase property but lease or rent instead. If the use of a particular product is hazardous, then do not manufacture or sell it(Fennelly, Perry, 2017). Avoiding a risk entirely can deprive an organization of economic opportunities and can prevent the execution of a project entirely. By the same token, if the project scope is reduced to avoid risk, the profits may also be reduced. This approach will ensure risk is avoided, however, if used excessively, avoidance can be detrimental to the success of a project. Risk exists everywhere, eliminating all risks is unrealistic. Moreover, Its important to note that risk avoidance is usually the most expensive of all risk mitigation options(Herrera, 2013). When tasks are removed entirely from a project, additional resources may be necessary to fill in gaps and help projects stay on target despite missing components.

Acceptance is the opposite of risk mitigation; in this strategy, no response is planned and the cost of risk is accepted. MHA consulting describes when acceptance is used, This strategy is a common option when the cost of other risk management options such as avoidance or limitation may outweigh the cost of the risk itself. A company that does not want to spend a lot of money on avoiding risks that do not have a high possibility of occurring will use the risk acceptance strategy(Herrera, 2013). By using the risk register, the probability and impact of each task can be calculated. Adding these two values together creates a risk score which is used to prioritize the risk. Risks with a higher risk score and price should not be accepted as they may cause irreversible cost and schedule overruns. Investopedia states, Most businesses and risk management personnel will find that they have greater and more numerous risks than they can manage, mitigate, or avoid given the resources they are allocated(Kenton, 2021). Using and distributing resources effectively is important to maintaining project health and savings for potential unanticipated challenges. Typically, acceptance is used for small risks or catastrophic risks that are unrealistic to account for due to cost. Examples when acceptance is used is as follows in Marketing91, Any losses from a risk not recovered by insurance or completed the insured amount is an example of accepting risk. Kinds of risks include uncertainty in financial markets, legal obligations, project failures, natural reasons and disasters, credit risk, and aggressive competition(Bhasin, 2021). Depending on the size of the risk, acceptance can either be detrimental or an effective risk mitigation technique that can save resources.

Risk reduction/control is a risk mitigation technique that combines both avoidance and acceptance. Risk reduction anticipates a risk will occur, however, the risk can be negotiated and reduced. Minimizing the impact and probability of risk can save a project's resources and increase a projects opportunity for success. Monday mentions an example of risk reduction, For example, let us say your budget is tight, and there is a risk where you cannot complete a particular project due to a lack of funds. You can reduce the likelihood of that risk occurring by proactively managing the costs within the budget. You choose a cheaper option for raw materials or reduce the project scope so it can be completed within budget(Monday, 2022). Controlling and managing a projects materials, scope, and cost can reduce risks. Depending on the risk, different reduction techniques can decrease the impact and probability of risk. Another example of this method is stated by Investopedia, Health insurers encourage preventative care visits, often free of co-pays, where members can receive annual checkups and physical examinations. Insurers understand that spotting potential health issues early on and administering preventative care can help minimize medical costs in the long run(YU, 2021). Care visits can prevent health emergencies and reduce detrimental costs.

Transference redirects the responsibility of a negative risk to a different organization. If a risk requires resources beyond a company's capability, transferring this cost to another organization can help lessen these demands. Typically, when responsibility is transferred, an increased cost is required. PM Training describes the process of using the transference risk mitigation technique The company seeking to transfer the risk approaches a third party to get covered and get into a mutual agreement by signing a contract or purchasing an insurance policy. The company taking up the insurance policy is then mandated to make periodic payments in the form of premiums to honor the responsibility being undertaken by the third party. The third party, which must have the capacity and ability to insure and or control the risk, then assumes the obligation to cover the potential liability. While there is a possibility that this risk may not take place, the insured company has the benefit of concentrating on its core business mandate(PM Training, 2022). This technique can save a company from significant financial burdens at one given time; periodic and typically smaller payments to a third party may be more suitable. An example of this technique is also provided by PM Training, Luke Brown has taken on insurance coverage worth $5000 for his vehicle, which is meant to cover any form of physical damage. He is going to pay the agreed premiums for one year. Supposing Lukes vehicle is damaged and repairs the car for $1000, he will lay claim for the $1000 from the insurance company(PM Training, 2022). Depending on each project, the cost of transference will differ. Some companies may rely on this transfer to avoid paying excess cost and to reduce project failure. Incomplete work or defective materials may require the transference mitigation technique. Keeping workers safe may also require transference. If transferring the risk to a third party is ultimately cheaper than retaining the risk, this redirection is probably worthwhile.