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Passive Acceptance of Risk and Active Acceptance of Risk – PMP/CAPM

Passive Acceptance of Risk and Active Acceptance of Risk

These are two different risk response strategies to deal with the risks on the project. The idea behind good risk response strategies is to provide the team with various options and identify the actions that could reduce or eliminate threats to project objectives. Risk management team may use an acceptance strategy for known risks as the option based on analysis

A risk is an unforeseen event that is either positive or negative. In project management, the progress of a project primarily depends on the competence regarding predicting any particular outcome. Risks are an unexpected part of the project and therefore it’s crucial to control and anticipate them. Risk acceptance refers to when no change in the project is made to control risk.

Acceptance of risk means that the effect of the risk is low enough that one cannot do anything about it unless it occurs. By using the acceptance strategy, the influence of the risk is lower than the risk tolerance level. If the situation differs, it would not make logic to accept the risk. As soon as the risk occurs, the problem is fixed and the project management team moves on.

Accepting a risk doesn’t essentially mean that the project management team doesn’t do anything and the action is only executed if it occurs. Many project risks fall under this category. The category involves many insignificant risks. Also, there are numerous risks that requires the minimal cost to fix, though if they occur it would cost much more to examine and plan for them.

Passive Acceptance of Risk

Passive acceptance doesn’t need any action other than documenting the decision. Acceptance of risk is passive when the project team is unable to plan for the risk occurrence. Typically, many identified risks in the project are passively accepted. Since the risk is too small, the cost of formulating a plan and documenting it is higher than the cost of dealing with the risk without any preparation.

Example:

Suppose a situation when a software purchased for the project could be defective. The probability of this risk is 2% if it occurs.  That is, the delivered software will not work and need to be replaced with a new one. This may cause a delay of five days to a project that has 20 days to free float. In this situation, the passive acceptance approach will be used to deal with the risk i.e. to wait and see if something is wrong with the software.

Active Acceptance of Risk

Active acceptance involves further actions to be taken such as setting apart contingency to balance the effect of the risk. Active acceptance improves risk responses to be executed in case of risk occurrence. It includes exigence plans, contingency reserves, and distributes bigger time and budget to the project. Acceptance of risk is active when a risk is recognized as being acceptable, though a plan is formulated when the risk occurs. An effective approach is to devise a plan in case such events of risks occur instead of dealing with the risk where there is limited time and lots of constraints. At times, a wrong plan is executed to solve an issue since the solution is not evident.

Differences between Passive Acceptance and Active Acceptance

  • Passive acceptance requires no action beyond documenting the decision. This strategy is used for low severity and low priority risks only. During dealing with this passive acceptance in case Project management Team requires funds they may look for approval to get access to management reserves.
  • Active acceptance includes further action eg. setting aside contingency to offset the effect of the risk.
  • All unknown or residual risks follows acceptance strategy as no information available about them & team will deal with those risks as they occur.

Further Readings

 

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