In many people’s views, innovation and risk management do not naturally go together, even though everyone may argue they should. So, when they are combined effectively, the two fields aid businesses in pursuing opportunities that a risk-averse mindset leaves on the table. Risk management can support a company’s goal by highlighting residual risk, blind spots, and underinvested areas that endanger a company’s future. This article by Fahad Usmani at PM Study Circle speaks about residual risks and ways to tackle them.
Handling Residual Risk
Many businesses have devised “stage gates,” essentially funneling procedures to lessen ambiguity as risk exposure increases. Innovation and risk management should be seen as allies rather than rivals. Many experts believe that residual and secondary risks are unknown hazards and that they will deploy a backup plan and management reserve if they materialize. If any of the indicated risks arise, they will implement the contingency plan, but if it fails, they will fall back on the backup plan. You will use the contingency reserve in both situations because it is for identified risks. Management reserves are set aside to cover unknown risks.
Residual Risk vs. Secondary Risk
Residual risk occurs when a risk is not entirely eliminated. As defined in the PMBOK Guide, residual risks include all identified and knowingly accepted risks after implementing planned risk mitigation measures.
A risk is a hazard that could have an impact on the goals of your project. You will create a risk management strategy to mitigate it. Frequently, this reaction can produce a new risk or secondary risk. Secondary risks are hazards that develop directly due to adopting a risk response, according to the PMBOK Guide.
Project managers frequently overlook residual and secondary hazards and fail to create a plan of action. They only focus on primary risks. However, the residual and secondary risks are equally important. Neglecting them will endanger the success of your enterprise.
To read the original article, click on https://pmstudycircle.com/residual-risks-vs-secondary-risks/
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