In project management, properly handling recognized risks is critical to project success. There are two basic methodologies for dealing with these potential threats: risk minimization and risk acceptance, which reflect fundamentally different approaches to managing uncertainty.
- Risk Mitigation: This proactive method entails taking specific activities to lower the likelihood of a negative risk event occurring or to mitigate the possible impact if it does. The purpose of risk mitigation is to make the project less vulnerable to identified threats. Mitigation actions include establishing preventative measures (such as better testing), creating contingency plans (such as having backup resources), and shifting risk to a third party (such as buying insurance). The nature of the risk, its effects, and the cost-effectiveness of mitigation initiatives all influence the technique chosen.
- Risk Acceptance: In contrast, risk acceptance is a reactive strategy in which the project team recognizes the existence of a certain risk but chooses not to take any specific action to avoid it, reduce its probability, or mitigate its impact. This decision is frequently reached after weighing the potential implications of the risk against the cost and practicality of applying mitigation methods. Risk acceptance can be passive (no action) or active (building a contingency reserve to deal with the risk if it arises). It is often chosen when the risk's likelihood and possible impact are low or when the expense of mitigation surpasses the potential benefits.
The key distinction is in the proactive intervention. Risk reduction entails actively attempting to lessen the negative impacts of a risk before they occur, whereas risk acceptance entails admitting the danger and moving forward without implementing particular preventative or impact-reducing actions. The choice between these tactics is an important aspect of risk management strategy and should be based on a comprehensive assessment of each identified risk.
