Likelihood is the probability of occurrence that event
Impact of the event occurring (amount at stake).
Four strategies to handle risk for a given event:
This is a response type where you attempt to overcome the risk event by trying to stray away from or eliminate it altogether. You do something to your plan, so that the risk simply won’t occur. It involves a change in the concept, requirements, specifications, and/or practices to reduce risk to an acceptable level. It eliminates the sources of high or possibly medium risk and replaces them with a lower risk solution. This method may be used in parallel with the up-front requirements analysis, supported by cost/requirement trade-off studies. It may also be used later in the development phase when test results indicate that some requirements cannot be met, and the potential cost and/or schedule impact would be severe.
The response type where you transfer the responsibility for the risk to someone else. In project management, insurance is one response using transference, but you might also transfer the risk by hiring a vendor who is more adept at the particular work itself. Transference does not necessarily eliminate the risk – and in fact, the company who takes on the risk should be insured itself, otherwise, your project could still suffer great consequences if the risk occurs. Risk transfer may reallocate risk from one part of the system to another, thereby reducing the overall system and/or lower-level risk. It is a form of risk sharing and not risk abrogation on the part of the buyer or seller, and it may influences cost objectives.
Risk control does not attempt to eliminate the source of the risk but seeks to reduce or mitigate the risk. It manages the risk in a manner that reduces the likelihood and/or consequence of its occurrence on the program. This option...