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Managing contingency allowance; risk protection, transfer

A. Consider the following scenario.

o A leading biomedical company hires you as a consultant to help with a serious problem. The company had planned to complete their final acceptance testing of a new pacemaker last week, but found a significant integration risk between the pacemaker and the instrumentation used to perform diagnostic analysis on the pacemaker. The cause is determined to be a lack of thorough testing due to insufficient time allocated to the integration and test phase. Your job is to investigate the risk and make recommendations to reduce the risk. Project management wants to maximize quality and minimize total cost.

 How would you handle these conflicting objectives? What are your recommendations to project management regarding this risk? How does this scenario relate to managing contingency allowance?

B. Risk protection is a strategy that employs redundancy in order to mitigate a risk. An example would be a commercial airliner that has a manual override switch for the autopilot functionality. Risk transfer is a strategy that shifts the risk to another person, group, or organization. An example would be discontinuing the online help features in a new software application to save development time and money. The risk is transferred to the help desk personnel and their ability to handle the phone calls from customers.

o Discuss how you have used or might use risk protection and risk transfer in a situation

Solution Preview


The scenario on the pacemaker of a leading biomedical company indicates that there is something wrong with the research, particularly the testing procedure conducted. The research result indicates an integration risk as manifested by a gap between the expected outcome (instrumentation used to perform the diagnostic analysis) and the resultant pacemaker (the actual outcome). The defense that this was caused by lack of thorough testing and insufficient time is indicative of absence of research direction. This should have been provided by the research plan in which instrumentation and testing should have been a part.

The objective of the research/testing conducted was to attain the expected outcome in relation to the new pacemaker but it seems that there were no definite procedures set, as to number of tests, duration of the testing, and other variables. These should have been determined at the start, along with the objective of the study in mind.

On the positive side, it seems that the number of tests and the durations of testing may have been determined earlier (not because they wanted it but because these are needed to make the process ...

Solution Summary

Managing contingency allowance, risk protection and transfers are examined.