You are the project manager of the YHG project for your company. Within the project, you and the project team have identified a risk event that could have a financial impact on the project of $450,000. This risk event has a 70 percent chance of occurring in the project. The project identifies a solution that will reduce the probability of the risk event to ten percent, but it will cost $260,000 to implement. Management agrees with the solution and asks that you include the risk response in the project plan. What risk response is this?

A.
This is not a risk response, but a change request.

B.
This is transference because of the $260,000 cost of the solution.

C.
This is mitigation because the response reduces the probability.

D.
This is avoidance because the risk response caused the project plan to be changed.

Explanation:

Mitigation reduces the probability and/or impact of a risk event. In this example, the probability has been reduced to ten percent due to the costs of the $260,000 implementation. Mitigation is a risk response planning technique associated with threats that seeks to reduce the probability of occurrence or impact of a risk to below an acceptable threshold. Risk mitigation involves taking early action to reduce the probability and impact of a risk occurring on the project. Adopting less complex processes, conducting more tests, or choosing a more stable supplier are examples of mitigation actions. Answer option D is incorrect. Avoidance removes the risk altogether. In this instance, the risk still has a ten percent chance of happening, so it’s mitigation, not avoidance. Answer option B is incorrect. Transference transfers the ownership and management of the risk event to a third party; there’s no evidence that the risk has been transferred. Answer option A is incorrect. This is a risk response because the solution directly addresses the risk event. Reference: "Project Management Body of Knowledge (PMBOK Guide), Fourth Edition"