5.6.1 General (e.g., Moderate and High Risk-Rated
After the program's risks have been assessed, the PM must develop approaches to handle significant ones by analyzing various handling techniques and selecting those best fitted to the program's circumstances. The PM should reflect these approaches in the program's acquisition strategy and include the specifics on what is to be done to deal with the risk, when it should be accomplished, who is responsible, and the cost and schedule impact.
As described in Chapter 2 , there are essentially four risk-handling techniques, or options. Risk avoidance eliminates the sources of high risk and replaces them with a lower-risk solution. Risk transfer is the reallocation of risk from one part of the system to another, or the reallocation of risks between the Government and the prime contractor or within Government agencies. Risk control manages the risk in a manner that reduces the probability/likelihood of its occurrence and/or minimizes the risk's effect on the program. Risk assumption is the acknowledgment of the existence of a particular risk situation and a conscious decision to accept the associated level of risk without engaging in any special efforts to control it. There is a tendency on many programs to select "control" as the risk-handling option without seriously evaluating assumption, avoidance, and transfer. This is unwise, since control may not be the best option, or even appropriate option in some cases. An unbiased assessment of risk-handling options should be performed to determine the most appropriate option.
In determining the "best" overall risk-handling strategy and specific techniques to be adopted, the following general procedures apply.
For each evaluated event risk, all potentially
applicable techniques should be identified and evaluated, using the following
- Provides program cost excursions from:
- Near-term budget execution
- External budget changes and constraints.
- Feasibility - Feasibility is the
ability to implement the handling technique and includes an evaluation of
the potential impact of the technique in the following areas:
- Technical considerations, such as testing, manufacturing, and
maintainability, caused by design changes resulting from risk-handling
- Adequacy of budget and schedule flexibility to apply the technique.
- Operational issues such as usability (man-machine interfaces),
transportability, and mobility.
- Organizational and resource considerations, e.g., manpower, training,
- Environmental issues, such as the use of hazardous materials to reduce
- External considerations beyond the immediate scope of the program, such
as the impact on other complementary systems or
- Cost and schedule implications -
The risk-handling techniques have a broad range of cost implications in
terms of dollars, as well as other limited resources, e.g., critical
materials and national test facilities. The magnitude of the cost and
schedule implications will depend on circumstances and can be assessed using
such techniques as cost-benefit analyses and the cost and schedule
assessment techniques previously described. The approval and funding of
risk-handling techniques should be part of the trade-off process that
establishes and refines the CAIV cost and performance goals.
- Effect on the system's technical performance - The risk-handling techniques may affect the system's
capability to achieve the required technical performance objectives. This
impact must be clearly understood before adopting a specific technique. As
the risk-handling techniques are assessed, the PMO should attempt to
identify any additional parameters that may become critical to technical
performance as a result of implementing them. Trade studies and sensitivity
analyses can be useful in determining the expected effectiveness of this
Once the risk-handling technique is selected, a set of program management indicators should be developed to provide feedback on program progress, effectiveness of the risk-handling options selected, and information necessary to manage the program. These indicators should consist of cost and scheduling data, technical performance measures, and program metrics.
Subsequent paragraphs in this section describe the various risk-handling techniques cited above.