Wendy has identified a risk event in her project that has an impact of $75,000 and a 60 percent
chance of happening. Through research, her project team learns that the risk impact can actually
be reduced to just $15,000 with only a ten percent chance of occurring. The proposed solution will
cost $25,000. Wendy agrees to the $25,000 solution. What type of risk response is this?

A.
Mitigation

B.
Avoidance

C.
Transference

D.
Enhancing

Explanation:

Risk mitigation implies a reduction in the probability and/or impact of an adverse risk event to be
within acceptable threshold limits. Taking early actions to reduce the probability and/orimpact of a
risk occurring on the project is often more effective than trying to repair the damage after the risk
has occurred.

Answer B is incorrect. Avoidance changes the project plan to avoid the risk altogether.
Answer C is incorrect. Transference requires shifting some or all of the negative impacts of a
threat, along with the ownership of the response, to a third party. Transferring the risk simply gives
another party the responsibility for its management-it does not eliminate it.
Transferring the liability for a risk is most effective in dealing with financial risk exposure. Risk
transference nearly always involves payment of a risk premium to the party taking on the risk.
Answer D is incorrect. Enhancing is actually a positive risk response. This strategy is used to
increase the probability and/or the positive impact of an opportunity. Identifying and maximizing
the key drivers of these positive-impact risks may increase the probability of their occurrence.