Question

You are managing a complex engineering project with 47 identified risks in your risk register. During a risk audit, your PMO director challenges your risk response strategy for Risk #23, which has a probability of 35% and an impact of $180,000 if it occurs. You have allocated $45,000 from the contingency reserve to implement a mitigation strategy that will reduce the probability to 15% and the impact to $120,000. The mitigation work will take 3 weeks and consume resources from the critical path. The PMO director argues that this mitigation strategy is not cost-effective. What is the most valid justification for your mitigation approach?

Accepted Answer

The mitigation is not cost-effective in pure EMV terms, but may be justified if Risk #23 has secondary impacts, triggers other risks, or threatens project objectives beyond monetary cost

Answer

The mitigation is justified because it reduces the expected monetary value (EMV) from $63,000 to $18,000, a $45,000 reduction that exactly equals the mitigation cost, achieving break-even risk efficiency

Answer

The mitigation is justified because the $45,000 investment reduces the maximum possible loss from $180,000 to $120,000, providing $60,000 in loss protection

Answer

The mitigation should be reconsidered because the 3-week critical path delay likely has a schedule performance impact cost exceeding the $45,000 EMV reduction achieved

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