What is the project manager performing in this situation?

A project manager has determined that an activity is too complex to complete internally so they hire a licensed contractor to complete the work .

What is the project manager performing in this situation?
A . Risk mitigation
B . Risk transfer
C . Risk acceptance
D . Risk avoidance

View Answer

Answer: B

Explanation:

By hiring a licensed contractor to complete the complex activity, the project manager is transferring the risk associated with that activity to the contractor. This is an example of risk transfer, as the responsibility for managing the risk is shifted from the project manager to the contractor.

According to the PMI Risk Management Professional (PMI-RMP) ® Handbook1, one of the domains of the PMI-RMP exam is Risk Response Planning, which involves developing options and actions to enhance opportunities and reduce threats to project objectives 1. One of the strategies for negative risks or threats is risk transfer, which involves shifting the impact of a threat to a third party, such as a contractor, a vendor, or an insurer2. In this situation, the project manager is performing risk transfer by hiring a licensed contractor to complete the work that is too complex to complete internally. By doing so, the project manager is transferring the responsibility and liability of the activity to the contractor, who is expected to have the expertise and resources to handle the complexity. The project manager is not performing risk mitigation, which involves reducing the probability and/or impact of a threat2. The project manager is not performing risk acceptance, which involves acknowledging the existence of a threat and making a conscious decision to accept it without taking any action2. The project manager is not performing risk avoidance, which involves changing the project plan to eliminate the threat or protect the project objectives from its impact2.

Reference: 1: PMI Risk Management Professional (PMI-RMP) ® Handbook, page 62: A Guide to the Project Management Body of Knowledge (PMBOK® Guide) C Sixth Edition, page 436.