TOPIC: Residual risks and Watch list

Hi All, I have a question: what are the "residual risks" about? Are just those in the Watch list for which we have Passive Acceptance strategy, or also those in Active Acceptance for which we have the Contingency reserves allocated? This question is driving me crazy, I find conflicting information. I assume that when risks in the Watch list materialize, we use Management reserves to handle them, via unplanned workarounds in "Monitor risks", but this also looks a bit contradictory because PMBOK says that Management reserves are used for unknown-unknowns, while risks in the Watch list are not unknown, they are identified (otherwise they would not be on the Watch list)... So I wonder what resources do we use to handle risks resting in the Watch list, it seems impossible to use neither Contingency nor Management reserves..... Thank you very much for your help!

Hi Massimo,

based on the PMBOK definition, residual risks are risks that remain after risk responses have been implemented. So, as you correctly pointed out, they have been identified as risk, which means they are not unknown-unknowns.
As such, I would tend to use contingency reserves should it be the case; however, if these risks are on the watch list, then they have been considered as low probability/low impact, so access to reserves may not be needed.

My 2 cents here, and I'll be happy to hear other opinions on this.

Gabriella

Hi Gabriella and thank you very much for your feedback.
- Regarding "residual risks", so they should be the risks left after response strategies are implemented. Which leaves with two options: 1) if both active and passive ACCEPTANCE are considered as a strategy (which, I think it should, according to PMBOK) then the residual risks are the unknown-unknowns... But they are totally unknown, so how can we consider them as "risks" - we don't even know what they are. This leaves me a bit confused;
- Regarding the risks in Passive Acceptance (Watchlist). I was under the impression that Contingency Reserves are allocated for risks in ACTIVE Acceptance - i.e. risks where we do not have any other strategy than allocating time, money and resources to handle them if they occur. Risks in Passive Acceptance (Watchlist) to my understanding are not covered by Contingency Reserves, otherwise what is the difference from those in Active Acceptance?
Those in Passive Acceptance should be those that we did recognize, but for which we do not allocate any strategy nor resources nor reserves, so that if they occur, we handle them via workarounds in "Monitor Risks". With what resources? I would guess with Mgmt Reserves, if it wasn't that Mgmt Reserves are explicitly allocated for unknown risks, so for something that should not be listed in a Watchlist. It looks like an unsolvable mystery to me, but certainly there is something I am missing.....

Hi Massimo,

what do you mean by active vs. passive acceptance? Do you have any reference in mind for that?

Gabriella

Hi Gabriella,
I mean page 443 of PMBOK 6th edition, last bullet point, where they say: "Acceptance can be either active or passive. The most common active acceptance strategy is to establish a contingency reserve, including amounts of time, money, or resources to handle the threat if it occurs. Passive acceptance involves no proactive action apart from periodic review of the threat to ensure that it does not change significantly".
It seems no reserve (nor plan whatsoever) is allocated for risks in passive acceptance. They are just identified, analyzed and placed in a Watchlist because deemed low-priority and not worth any proactive action. Some prep books like Rita's say that we perform Workarounds for them, if they do occur, during "Monitor Risks". They would seem good candidates to utilize Management reserves, if it wasn't that Mgmt reserves are allocated for unknown-unknowns, and risks in passive acceptance are by no means unknown.
Thank you very much for your time.
Massimo

Thanks, Massimo. It looks like I have forgotten about that difference, so thank you for reminding it to me!
I totally agree with your interpretation regarding having no plan designed for passively accepted risks. So I would also expect that—should one of those risks arise—you as the PM would need to implement a workaround. As workarounds are not planned in advance, though, I would expect management reserves to be used, which brings me back to your point, I guess.

I'm sorry I couldn't be more help in there, but it truly is an interesting (and intricate) question!

Gabriella

Thanks Gabriella. Yes it looks like a "logical" mystery! Sooner or later we will find out. Anyway I am happy I passed my PMP last Friday with 5 AT's - it's been a long but rewarding journey.

Congratulations, Massimo! Happy to hear that!

Gabriella

As per my understanding for residual risk we will contigency reserves
Risk type : Residual risk
Status : identified /Watchlist
Response Strategy : Active Acceptance
Reponse Plan : Fallback Plan (Reserved Plan, Backup Plan)