Is it better to Avoid, Mitigate, Transfer, or Accept a high-impact project risk?

All answers to this question.

For a "catastrophic" impact, 'Accept' is rarely the right choice regardless of probability. You should frame it to executives in terms of 'Expected Monetary Value' (EMV). If the bankruptcy costs $1M and there's a 5% chance, the "cost" of that risk is $50k. If 'Transferring' the risk (e.g., through insurance or a performance bond) costs $10k, it's a clear financial win. 'Mitigation' might involve qualifying a second vendor now, which has an upfront cost but reduces the impact from catastrophic to manageable. Always show them the cost of doing nothing versus the cost of the response strategy; numbers usually speak louder than technical fears.

   Answered 2025-01-13 by Deborah Martin

Have you considered the 'Avoid' strategy by potentially bringing that specific vendor's service in-house? Or would the overhead of managing that new department be even riskier than the vendor bankruptcy itself?

   Answered 2025-01-15 by James Wilson

• James, bringing it in-house would definitely 'Avoid' the vendor risk, but our core competency isn't in that area. It would take us a year to build that team. I think Deborah's idea of 'Transfer' via a performance bond is the most logical middle ground for our current stage.

     Commented 2025-01-17 by Michael Scott

Never let stakeholders 'Accept' a catastrophic risk without a written sign-off. Once they have to put their name on the potential failure, they usually find the budget for mitigation.

   Answered 2025-01-19 by Karen Taylor

• That is a great psychological tactic, Karen. Making the accountability explicit often changes the conversation from "saving money" to "protecting the business," which is where it should be.

     Commented 2025-01-20 by Deborah Martin