HKSM

A utility preference in which a business stakeholder refuses to take on risk, favoring certainty even when potential rewards or opportunities are high.

Key Points

• Risk averse is a utility function category used to describe risk attitude in decision making.
• Such stakeholders set very low risk thresholds and choose predictable outcomes over higher but uncertain gains.
• They prefer responses like avoidance, mitigation, or transfer rather than acceptance or exploitation.
• In agile settings, they push for small increments, spikes/prototypes, and strong controls to reduce uncertainty.

Example

On a Scrum team building a payments feature, the product owner declines an unproven cloud service that could cut costs by 25% due to security and compliance risks. They stick with the proven provider and schedule a short spike to evaluate the new option safely before any commitment.

PMP Example Question

A sponsor is risk averse. Which action best aligns with their utility preference?

1. Select a fixed-price contract with a proven vendor and run a short spike before adopting new technology.
2. Adopt an unproven framework immediately to maximize potential performance gains.
3. Fast-track multiple risky workstreams to hit an aggressive launch date.
4. Accept a known security risk to deliver a high-profile feature early.

Correct Answer: A — Choose the safer, more predictable path and transfer/validate risk first

Explanation: A risk-averse stakeholder prioritizes certainty, favors risk transfer or avoidance, and uses small experiments to reduce uncertainty before committing.