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Advantages of risk avoidance
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Disadvantages of risk avoidance
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How to apply risk avoidance effectively
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Here’s what else to consider
Risk avoidance is one of the four possible response strategies for dealing with risks in project management. It involves eliminating the source of risk or changing the plan to avoid the risk altogether. While this may sound like an ideal solution, it also has some drawbacks that need to be considered. In this article, you will learn about the advantages and disadvantages of risk avoidance as a response strategy and how to apply it effectively in your projects.
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- Matt P. 3
- Susan Reilly Retired Project Manager 3
- Jim Little Executive Consultant, Board Member, Nuclear Energy Programs 2
1 Advantages of risk avoidance
One of the main benefits of risk avoidance is that it reduces or eliminates the potential negative impact of a risk on the project objectives, scope, quality, cost, or schedule. By avoiding a risk, you can save time, money, and resources that would otherwise be spent on mitigating or transferring the risk. You can also avoid the stress and uncertainty that comes with facing a risk and its consequences. Risk avoidance can also help you maintain your reputation and credibility as a project manager and avoid legal or ethical issues that may arise from a risk.
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- Matt P.
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For the sales professionals, a pillar in the sales process is to qualify a potential opportunity. Be willing to say “No”. Its Risk avoidance at its core. This can cost time & money when abandoned. Risk avoidance among other advantages protects people, resource, brand and the balance sheet.
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In my experience risk avoidance is the first choice ,in case there's no other possibility you should look for the next step .The less risk possible and on and on ,until there's no more choices.After that the professional will decide what's the next best option based on experience and common sense.
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2 Disadvantages of risk avoidance
However, risk avoidance also has some disadvantages that you need to be aware of. First, it may not always be feasible or realistic to avoid a risk completely. Some risks are inherent to the nature of the project or the environment and cannot be eliminated without compromising the project value or viability. Second, risk avoidance may entail significant trade-offs or opportunity costs. By avoiding a risk, you may also miss out on potential benefits or rewards that come with taking a calculated risk. You may also lose competitive advantage or innovation potential by being too cautious or conservative. Third, risk avoidance may create new risks or increase the exposure to other risks. By changing the plan or the scope to avoid a risk, you may introduce new uncertainties or dependencies that could affect the project negatively.
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3 How to apply risk avoidance effectively
Risk avoidance is not a one-size-fits-all strategy, and should be used selectively and strategically. To apply it effectively in your projects, you should conduct a thorough risk identification and analysis process to identify sources, causes, and effects of the risks, as well as their probability and impact. You should also evaluate the feasibility and desirability of avoiding each risk, considering the costs, benefits, and trade-offs involved. Once you have chosen the best alternative or option to avoid the risk, document and communicate the risk avoidance decision and plan to the relevant stakeholders. Additionally, monitor and review the risk avoidance plan and its outcomes, adjusting it as needed to ensure its effectiveness and efficiency. Risk avoidance can be a useful response strategy for managing risks in project management; however, it is important to understand its advantages and disadvantages before applying it wisely to enhance your risk management skills and improve project performance.
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- Jim Little Executive Consultant, Board Member, Nuclear Energy Programs
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One aspect is not to avoid risk but explore it further. For example, what has to be true for the risk to materialize? How might those “truths” be neutralized? The key is what assumptions are risks dependent upon? How might those assumptions be neutralized or made to be factual in nature ?
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4 Here’s what else to consider
This is a space to share examples, stories, or insights that don’t fit into any of the previous sections. What else would you like to add?
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- Susan Reilly Retired Project Manager
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This article is a good beginning, however there are a few other factors that come into play in developing a risk avoidance plan. Those factors include the maturity of the organization, its culture of dealing with risk and any external partners that may be involved at any stage down the road. This option is good when the organization has both a well grounded risk management program and a competent change management system for projects in place.
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Put together a probabilistic risk analysis and perturb the assumptions and dependencies to get a feel for the sensitivities that drive the result.
Like Like Celebrate Support Love Insightful Funny 2 - Lois Rogers CEO and Co-founder of ClaimsMaid...bringing together insurance and technology
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Any project of value need periodic risk analysis.This will allow the project owners to continuously monitor what might cause problems.List top five things that are your biggest concerns. Then quantify each. Some may have more than five, but at least five. Acquire what you need to make sure these cannot derail your project.For example, acquiring the correct insurance coverages, like Cyber Insurance.
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