Confused by the terms inherent risk, contingent risk, and residual risk? This video explains the differences clearly and simply, with practical examples for project managers and risk professionals. Learn how these key risk concepts affect planning, decision-making, and project success.
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Inherent risk
Inherent risk is the raw, natural level of risk that exists in a process, activity, or business model before any actions are taken to mitigate it, or external factors impose upon it.
It reflects the baseline exposure a project or organization faces due to the nature of its activities, operations, processes, and environment.
Contingent risk
Contingent risk is a potential for uncertain events to occur, which could impact a project, business, or transaction. Contingent risks will arise as a result of specific circumstances or events – upon which they are contingent.
Unlike inherent risks, which are baked into the project or activity, contingent risks will only emerge in the context of certain scenarios. They are often low-probability but high-severity, requiring a ‘Plan B’, or contingency plan.
Identification of contingent risks comes from a scenario analysis that looks at possible risk events arising from different scenarios and how they affect your project.
By the way… Residual Risk
Residual Risk is the risk remaining after you have implemented your risk response. It is the ‘leftover’ risk that exists because no mitigation effort completely eliminates all risk.
Check out our video that compares Residual risk with Secondary Risk
Recommended Videos to Help with Risk Types
Carefully curated video recommendations for you:
- Risk Management 101: An Introduction to Project Risk Management
- What is a Residual Risk & What is Secondary Risk? | Video
- 4 Types of Project Risk – Different Forms of Uncertainty | Video
- What’s the Difference: Risk Appetite – Risk Tolerance – Risk Capacity?
- What is a Black Swan? | Video
What Kit Does a Project Manager Need?
I asked Project Managers in a couple of forums what material things you need, to do your job as a Project Manager. They responded magnificently. I compiled their answers into a Kit list. I added my own.
Check out the Kit a Project Manager needs
Note that the links are affiliated.
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