Understanding Secondary Risks in Project Management

If a project manager hires a licensed contractor to complete dangerous work but the contractor may cause delays, what type of risk event is this an example of?

• A. Secondary risk
• B. Transference
• C. Internal
• D. Pure risk

Answer: (A)

The situation described illustrates a secondary risk event. In risk management, a secondary risk arises as a consequence of employing a risk response strategy or executing a specific action. In this case, hiring a licensed contractor to perform dangerous work effectively transfers the risk of safety to the contractor, but it also introduces the potential for delays, which is an outcome resultant from that decision. Therefore, the delays caused by the contractor's actions exemplify a secondary risk arising from the initial decision to hire. Transference, while relevant, pertains to the act of shifting the risk from one party to another, as is done by hiring a contractor. However, the central aspect of the question focuses on the subsequent effect (the delays) resulting from that transference. Internal risk refers to risks that originate within the organization itself, such as organizational processes or resource constraints, which is not applicable here as the focus is on the contractor. Pure risk involves situations where there is a chance for loss or no gain, without the possibility of profit, usually relating to insurable risks. The context of hiring a contractor, thereby facing potential delays, doesn’t fit this definition, as it carries implications of project timelines and outcomes rather than purely insurable risk situations. Recognizing the nature of secondary risks

When it comes to project management, the landscape is filled with potential hazards. You know what? It’s a bit like walking a tightrope. One wrong move, and you risk a disaster. This is where the concept of secondary risks comes into play and it’s crucial for students preparing for the Certified Governance Risk and Compliance (CGRC) exam to understand.

Imagine this: you’ve got a project to manage that involves some hazardous tasks. You wisely decide to hire a licensed contractor to handle the heavy lifting. Great, right? You've just transferred the risk of safety to the contractor. But then, you start to worry—the contractor's found some issues that need sorting, and suddenly, you’re facing delays that might throw your entire timeline into chaos. Well, my friends, this scenario is a textbook example of a secondary risk.

So, what the heck is a secondary risk? Simply put, it’s a risk that arises as a consequence of implementing a risk response strategy—in this case, hiring that contractor. While you thought you were minimizing risk by offloading it to a professional, you’ve inadvertently opened the door to a whole new set of potential problems, namely the delays.

Now let’s get down to some technicalities: There’s a fine line between different types of risks, and it’s easy to mix them up. The correct answer here is a secondary risk because those delays are a direct result of your decision to hire someone else to take on a dangerous task. It’s important to remember that risk management isn’t just about dodging bullets; it's also about anticipating where new fire could light up.

You might hear the term transference tossed around a lot, and indeed it's relevant here. It’s about shifting the risk from one party to another, which is precisely what you did by hiring that contractor. But here's the kicker: while you’ve transferred the responsibility for safety, you aren’t absolved of the responsibility for any ripple effects that arise, such as those pesky delays. Those delays are what we’d categorize as a secondary risk.

And don’t even get me started on internal risks! These are the headaches that arise from within your own organization—think of organizational processes gone awry or internal resource issues. In our example with the contractor, we’re focusing on external factors that influence our timelines.

Lastly, let’s break down what pure risk means. It usually revolves around the possibility of loss or no profit, typically tied to insurable events. In hiring a contractor, it’s more than just a potential loss; it’s about navigating project milestones and timelines, making this an entirely different breed of risk evaluation.

As you study for the CGRC exam, keep these distinctions in mind. Secondary risks remind us that decisions have layers, and understanding these layered risks is essential in becoming effective in governance, risk, and compliance fields.

So, as you ponder on how secondary risks can affect project management, consider how each choice you make can influence both the immediate and subsequent outcomes. Just like in life, every action has a reaction, doesn’t it? And being prepared for these reactions is what can set the successful project manager apart from the rest.