HKSM
Risk Averse
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?
- Select a fixed-price contract with a proven vendor and run a short spike before adopting new technology.
- Adopt an unproven framework immediately to maximize potential performance gains.
- Fast-track multiple risky workstreams to hit an aggressive launch date.
- 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.
