Tuesday, November 17, 2009
I'd like to share an analogy I use in my Project Management courses to explain the often misunderstood difference between secondary and residual risk.
Secondary risks are those which are caused by the treatment or response to the risk.
Residual risk is the risk which remains even after you have treated or responded to the risk.
So here goes the analogy.
You are jumping from a plane. Yep. That's a situation which clearly has some threat to it. It also has opportunity (in this case a thrill). But let's focus on the threat. How do we respond to the threat of severe injury or death that we will encounter if we simply fall to the ground from several thousand meters (or feet, it really doesn't matter)?
Well the answer is that we mitigate the risk with a parachute. That's our risk response. So let's go through two scenarios in which the parachute doesn't work exactly like it was designed.
Scenario 1: We pull the cord, and the parachute deploys but due to air currents, the force of the "tug" when it deploys causes you to sprain your shoulder. Oh, CHUTE! Ow! That hurts. That is an example of secondary risk. The risk response (the chute) caused a new risk.
Scenario 2: We pull the cord, the parachute deploys smoothly, and we cruise to the ground but for whatever reason it does not provide us a slow enough descent and, Oh CHUTE! Ow! we sprain an ankle when we land. That's an example of residual risk - a threat that remains even after we have responded to the risk.
I hope that helps clear up the difference.
Whether or not this cleared things up for you, at least get a laugh out of this posting. Have a look at this humorous video from Dutch insurance carrier Centraal Beheer, involving... you guessed it, a secondary risk from a parachute. Click here for the video.
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