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Contingencies are potential risk response actions that will only be implemented if some triggering event or condition has shown that the risk probability has gone from unlikely to likely.

Quick reference

Contingencies and Triggers

Contingencies are potential risk response actions that will only be implemented if some triggering event or condition has shown that the risk probability has gone from unlikely to likely.

When to use

When the risk analysis (qualitative and quantitative) has been completed, risks that are high impact but low probability often are addressed with contingencies and triggers.

The triggering condition is tracked by the project team.  If the trigger occurs, the risk mitigation response is implemented.

In addition, when a rebaseline occurs or at the beginning of each phase or stage, the risks are again considered for contingencies and triggers.

When a contingency is implemented, other risks are checked to determine if the probability of those are increased or decreased by implementing the contingency.

Instructions

This risk response is a two-step response.  The first step is to accept the risk.  This is usually because the risk is unlikely.  At this point, the project plan normally remains unchanged. 

However, an alternate project plan is developed (at least the first few steps) for the unlikely condition when that risk does occur.  This alternate plan normally has some detrimental attributes as compared to the normal plan (it costs more, it takes longer).  If the alternate plan was better than the normal plan, the project team should switch to the alternate plan immediately.

In addition to developing an alternate plan, a project condition should be selected to act as a trigger indicator.  If the trigger condition occurs, it indicates that the risk has changed from unlikely to likely (or present).

When the trigger indicates that the risk is now likely, it is time for the second step; the project plan is changed to the alternate plan that includes a risk response for the risk condition.

Definition: Contingent Response Strategies: "Responses provided which may be used in the event that a specific trigger occurs." PMBOK® Guide

Triggers

Triggers are monitored by the project leader and Core Team.  Effective triggers have these characteristics:

  • Appropriate for the type of risk
  • Timely to allow implementation of an alternate plan
  • Discrete for a clear indication of the triggering event, no ambiguity
  • Documented so that the team knows what they should be tracking

This definition is taken from the Glossary of the Project Management Institute, A Guide to the Project Management Body of Knowledge, (PMBOK® Guide) – Sixth Edition, Project Management Institute, Inc., 2017.

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  • 00:04 Hi, I'm Ray Sheen.
  • 00:05 I'll like to talk with you now about one of the most commonly used techniques for
  • 00:08 managing project risk and that's using contingency planning.
  • 00:10 In fact, in many organizations risk management is called contingency planning.
  • 00:17 Contingent response to risk is a two step response.
  • 00:21 The Project Management Body of Knowledge, the PMBOK Guide,
  • 00:25 defines contingent response strategies as responses provided,
  • 00:29 which may be used in the event that a specific trigger occurs.
  • 00:33 Contingent response is appropriate for risks with high impact and
  • 00:37 very uncertain or unlikely probability.
  • 00:40 When the response to these risks would lead to a project
  • 00:44 approach that is in some manner inferior to the baseline plan,
  • 00:47 such as taking longer or the quality of deliverable is degraded.
  • 00:51 Then the project team does not want to respond unless they have to.
  • 00:56 That is why the two step approach is selected.
  • 00:58 It provides the opportunity to make wise decisions at the appropriate time.
  • 01:03 The first step of this response is to use the Accept strategy.
  • 01:07 The project baseline is unchanged, the project continues as originally planned.
  • 01:12 The next step is to prepare an alternate plan using an appropriate risk response
  • 01:17 strategy such as avoid, mitigate, transfer, exploit, enhance or share.
  • 01:22 Let's call this plan B.
  • 01:24 Plan B is inferior to the baseline plan.
  • 01:27 If Plan B is better than the baseline plan,
  • 01:30 then you should switch to Plan B immediately.
  • 01:32 The last element of a good contingency response strategy Is to have a very
  • 01:37 clear trigger.
  • 01:38 This is any event or warning that the probability of the risk has changed from
  • 01:43 unlikely to likely and that plan B needs to be implemented.
  • 01:47 Let's talk about that risk trigger.
  • 01:50 It's a crucial element in managing contingent risk response.
  • 01:54 A risk triggers should be set as part of risk planning.
  • 01:58 When you have risks with high uncertainty, the preferred approach is often
  • 02:02 a contingent response, the need for establishing the trigger during
  • 02:06 risk planning is to ensure you have buy in on the trigger.
  • 02:09 Some people are risk seekers and others are risk avoiders.
  • 02:13 Risk avoiders often want to set the trigger at a very early or
  • 02:17 very low threshold, whereas risk seekers want to stay with the current plan as
  • 02:22 long as possible, assuming it's better than Plan B.
  • 02:25 If you try to get them to agree on switching to plan B in the middle of
  • 02:29 the project, when people have been working 10 and 12 hour days,
  • 02:33 often there's an argument and conflict on the team.
  • 02:36 Because the risk seekers will feel like hey you're just giving up,
  • 02:39 you're not trying hard.
  • 02:41 But the risk avoiders feel like the current approach is hopeless and
  • 02:45 a waste of time.
  • 02:45 Instead, have the discussion during the planning phase when everyone is calm and
  • 02:51 rational to select a risk trigger.
  • 02:53 Then when the trigger conditions occur but not before, you switch to Plan B.
  • 02:57 The trigger then is used to indicate that it's time to switch to Plan B.
  • 03:02 This trigger is something whose status needs to be tracked by the core team.
  • 03:06 They need to know when it indicates a change,
  • 03:09 put it in your project control plan.
  • 03:12 A good risk trigger will have these attributes.
  • 03:15 First, it will be appropriate for the type of risk, meaning it really does indicate
  • 03:20 that the risk has moved from an unlikely condition to a likely condition, or
  • 03:24 possibly has even occurred.
  • 03:26 Second, the risk trigger is timely with respect to the project schedule.
  • 03:31 It provides enough time to respond to the risk and implement Plan B.
  • 03:34 You want to avoid a lagging indicator that shows up after the risk has been
  • 03:39 experienced.
  • 03:40 Ideally, it is a leading indicator and warns that the risk is impending.
  • 03:44 Third, it is discreet.
  • 03:46 By that I mean it's a clear indication of the risk status.
  • 03:51 The trigger is in on or off, it's black or white, not shades of gray.
  • 03:56 That is, again, to avoid the debate among your team members and
  • 04:00 it's easier to set the control limit.
  • 04:02 Finally, it's documented.
  • 04:04 Your trigger and your alternate plan should both be documented.
  • 04:08 Then everyone knows immediately what to do.
  • 04:11 When it's time to go to plan B, you don't waste time explaining to team members and
  • 04:15 stakeholders why you're doing what you're doing.
  • 04:19 That's already being coordinated with them.
  • 04:20 Also, project team members and
  • 04:21 even stakeholders often change during the life-cycle of the project.
  • 04:25 Documenting triggers helps the newbies come up to speed.
  • 04:29 >> The contingent response is a valuable and practical response to project risks.
  • 04:33 Use it wisely.

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