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The Differences between Avoiding and Accepting Risk

INTRODUCTION
Risk is something that is cannot be neglected in project. Project managers or project
team must be able to differentiate types of risk that will benefit the project and also the type
of risk that can cause harm to the project. When encountered with risk, project team or
project manager must be able to response rightly based on types of the risk. There are many
type of response development method can be used which response is appropriate to specific
event. They include mitigating risk, avoiding risk, transferring risk as well as accepting risk.
There are many definitions that can describe risk. One of the definition is it is an
uncertain event or condition that has positive or negative effects on project activities if it
happen [7]. Another word that can be used to describe risk is that risk is and unavoidable
event that can cause delays, excessive spending, and unsatisfactory project results, safety or
environmental hazards and even total failure [5]. Therefore, in order to manage risk, risk
management process is needed. Risk management is considered as a tool for managers to deal
with the complexity and uncertainty that may occur in project [2]. Risk management can be
defined as a systematic approach to setting the best course of action under uncertainty by
identify, assess, understand, act on and communicate risk issues [1].
BODY TEXT
Through risk management, risks are not something that can fully avoided by the
project team. It is something like a reduction of the negative deviation prom plan [4]. Risk
management had a purpose for the team to be preparing for any risk and to take measures
when dealing with unexpected and undesired event [5]. There are many approaches that have
been used for risk management. Some of approaches that has been used include, (1) three-
tiered process which consists of identification of risk, evaluation or assessment and procedure
to dealing with them [2], (2) five-step process for managing project risk which consists of
identify risk, analyse risk, prioritize and map risk, resolve risk and monitor risk [6]. Under the
procedure to dealing with risk and resolve risk, there are two method that can be used as a
way to deal with risk which are avoid the risk and accept the risk.
Risk is something uncertain in a project because it not happened yet and it may not
happen at all. Nonetheless, when it is happen, project manager must be able to react
according to plan. By avoiding risk, project manager choses to eliminate the risk or make
opportunity certain [4]. To avoid risk, project manager will have to not undertake the activity
that might cost the risk to happen [1]. The best thing to react to risk if we know that it will
give us negative impacts is to avoid it. If it can be prevented to happen, it will not cause any
harm to the project [3]. It is impossible to avoid all risk. However, some risk can be avoided
before the project start [7].
Some risks are too large to be transfer, avoid and mitigate. Therefore, accepting the
risk is the best alternative to use in order for the project manager and the team to be able to
handle it [7]. But when even accepting the risk is a choice, the project manager and the team
should at least look at the alternatives and absolutely knows the impact of it if the risk is
accepted [3]. It is also said that accepting risk is the process where no action is taken with
regards to the risk or the opportunity [4]. Opportunity is once again mention because we
know that risk can have a negative or positive impact to our project. However, to accept risk,
it is best for the project manager and the team to be able to manage it. Resource requirements
also heavily needed if this strategy is to be used [1].
DISCUSSION
For a project manager and the team to avoid or accept risk, there must have strong
reasons to select which way of managing risk will works for the situation. Not all risk can be
avoid nor accept. Before making any decision on ways to handle risk, the risk must be
analysed and evaluate first. After analysing and evaluate, project manager and the team may
treat the risk appropriately. However, before treating it there are several factors to consider
like whether the likelihood of the risk occurring can be reduce through preventive
maintenance, quality assurance and etc. and whether the consequences of the risk can be
reduce when it happen through contingency planning and many other ways.
Avoiding risk is more applicable for a risk that the project team knows about the
consequences of it. If the risk will seriously harm the project or the team or the cost of the
project, it is best to be avoided before it happening. For instance, if the project team has a
project to demolish an old building in the heart of Petaling Jaya city which is close to resident
area, the team should avoid taking risk to use an explosive demolition method which will
cause serious problem to the resident like health problem from the dust that result from the
explosion.
The other reason for project team to avoid risk is because it is uncertainty. For
instance, high risk may cause a very big loss if it is fail to be handled but it may have a high
profit when it can be controlled. This uncertainty risk is usually will be avoided since the fail
of handling it can cause serious harm and big loss to the project. Another reason to avoid risk
is when the risk is naturally happen which when it happen the team definitely cannot avoid it.
For example, weather like rainy season. For example, if the team is having a project to level
hills, rainy season is something that the team wants to avoid because it can risking the
employee and will directly causes loss when any accident happen.
However, when the risk cannot be avoid, transfer or mitigate, accepting and managing
it is the appropriate response to the risk. The project manager and the team should see it in
the positive side. Instead of seeing it causing loss (which definitely it will do), the risk may
offer opportunities to the project. This is because, it is said that great unforeseen opportunities
are often comes from risk taking. The higher the risk, the higher the potential of the value of
the risk should be, high profitability can be expected from the activity with a high risk of loss.
Moreover, by accepting and taking risk positively, will make the team more prepared
for the next project. The project manager and the team will have more confident to handle the
same risk in the future. Risk will force every team player and the leader to learn which later
will leads to the internal growth for the team as well as the company. In addition, embracing
risk-taking will help the project manager to overcome fear of failure.
CONCLUSION
Risk management is very important in project management. It can improve decision
making process in the team. By carefully following steps to manage risk, the team should be
able to make decision whether to avoid, transfer, mitigate or accept and manage the risk.
However, the way how risk should be risk must lead to the positive way. For example, if the
risk to be accepted and managed, there will be certain loss that the project team have to
handle, however, the loss should leads the project into a more profitability way. Managing
risk will also support the team to improve knowledge. Managing risk will also developed
opportunities for future activities to be more in controlled manner so that maximum profit can
be gained from the activities.
REFERENCES
[1] Heinz-Peter Berg (2010), Risk Management: Procedures, Methods and Experiences,
(Vol. 1)
[2] Bernd Carsten Stahl, Yossi Lichtenstein, Anita Mangan, The Limits of Risk
Management A Social Cosntruction Approach, Communications of the International
Information Management Assiciation, Volume 3 Issue 3
[3] Jennifer Greene, Andrew Stellman (2013), Head First PMP - A learners Companion
to Passing the Project Management Professional Exam (Third Edition), OReilly School of
Technology
[4] James Catmur, Stephen Rogers, Rodolfo Guzman, Paolo Dutto, Project Risk
Management An Executive Concern, Energy & Utility Viewpoint; Arthur D Little (2013)
[5] Tzvi Raz, Aaron J. Shenhar, Dov Dvir (2002), Risk Management, Project Success and
Technological Uncertainty, R&D Management 32, 2 2002
[6] Preston G. Smith (2002), Managing Risk Proactively in Product Development
Projects
[7] Larson, E.W. and Gray C. F. (2011), Project Management The Managerial Process
(Fifth Edition), McGraw-Hill International Edition.