questions in risk management.

two questions regarding risk management..

A - Do I have to plan risk response for the natural catastrophe and assign a reserve for them? if yes, contingency reserve or management reserve? 

B-  Do I have to plan risk response to the residual risks? or what to do with them? give an example of residual risks..

 Thanks alot. 

A-Yes since natural catstrophies are beyond your control- you simply accept the risk and deal with it when it occurs.  Since these risks do not change the scope of the project you have to use contigency reserves first to bring back the project in line with expected future performance.

B. No.  Regardless of the amount of planning and acting there remains inherently some risk- This is called residual risk.  You can't do any thing further with them.  Simply accept and live with them.

Example: You implement Six Sigma methodology and tightly control your process and achieve the results upto six sigma level i.e. 99.97% of your deliverables meet the requirements.  Remaining 3 out of million parts will be defective- this is residual risk.  Can you do some thing about it?  No. As and when those low probable 3 out of million defects appear, you simply replace those with good ones and move on.  100% is only hypothetical.

For A- Natural catstrophies is unknwon-unknown Risk. accept the risk and deal with it when it occurs and you have to use Management Reserves.

B.regards

yasser