Risk like changes is unavoidable and integral part of project life. We don’t want to be caught off guard in the event of the risk happening. Thinking methodically about what could go wrong or as a matter of fact what opportunities can be exploited keep us ahead of the future unknown event. Show Positive Risk (Opportunity) Positive risks are typically referred to as opportunities. These positive risks or opportunities are ambiguous but fortunate events with a significant impact on the ultimate project goals. The prospects save budget and resources of the project. PMBOK® Guide Sixth Edition defines Positive Risk as: “An individual project risks are uncertain events or circumstances that positively influence one or more project objectives. The opportunities arise from all possible sources of uncertainty including individual threats and demonstrating the experience of stakeholders to the implications of project outcomes” Below we have listed the five positive risk response strategies that encourage positive risks: Escalate The risk response strategy is applicable when the project team or project benefactor accepts that the opportunity is beyond the scope of the project. For this, the project team invests resources to recognize the opportunity and records it in the risk register. Exploit This strategy aims to eradicate the uncertainty associated with a certain positive risk by ensuring the opportunity must occur. The project management team devotes the resources to understand the opportunity. The exploited opportunities are later removed from Risk Register since there is no more uncertainty. They have a significant impact over project objectives. Enhance The enhance strategy improves the probability of the positive impacts of an opportunity. The approach employs practices to recognize positive risks to a greater extent. This strategy is applicable when critical positive risks are not exploited. Share Positive risk involves apportioning either some or all of the tenure of the opportunity to a third party to acquire the prospects that eventually benefit the project. This approach is used when you are required to work with a partner and realize the complete opportunities. When it becomes challenging to exploit or enhance the positive risks, the project team consider the shared strategy. For instance, risk-sharing partnerships and joint ventures. Accept Accepting an opportunity allows its presence, though no proactive action is taken. This strategy is applied typically for low-priority prospects. Also, it is used where it’s difficult or costly to address an opportunity. Accept strategy is kept in the Risk Register though you don’t need to use it ahead.
Negative Risk (Threat)PMBOK® Guide Sixth Edition defines Negative Risk as: “Negative Risks are referred to as threats that negatively influences one or more project objectives such as cost, quality, time, etc. if it occurs”. To evaluate and manage negative risks, the below-listed strategies are used: Escalate Avoiding risk is an important response strategy where the project team tries to remove the threat or protect the project from its influence. These threats are recorded in Risk Register that is further used by the project team after escalation. It primarily involves modifying the project management plan such as making changes in the design of the project even in the execution phase. For this strategy, risks are mostly identified in the early strategy so it could be avoided as soon as possible. This first response strategy is for critical risks that substantially influence the viability of a complete project. Mitigate This risk response strategy is used when the project team intends to minimize the probability of occurrence or influence of risk within the defined threshold limitations. It involves adjusting the project management plan such as conducting further activities in the project schedule or scope of the project. It brings down the critical level of the given risk. Transfer Risk transfer requires paying a risk premium in the managing risk. It involves various tools such as indemnification, performance bonds, assurances, etc. The response strategy is used when the project team shifts the influence of a risk to a third party in association with the proprietorship of the response. The strategy is used for low critical risks where the responsibility of the risks is transferred to another party without eliminating it. Though you may identify the secondary risks when doing the transfer. Accept The accept risk response strategy is used for non-critical risks and remains in risk register since there is no change in risk exposure. The project team acknowledges the risk and doesn’t take any action unless the risk occurs. Here the team recognizes the warning signs for the given risk and execute the plans in time. Though it’s crucial to understand whether the risk acceptance is either active or passive. Active risks require the team to establish the eventuality reserve such as time, money or resources. While passive acceptance requires the project team to decide to take care of risks. Examples of Positive and Negative RisksOpportunity (Positive Risk)
Threats (Negative Risk)
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Positive risks are event which have a positive impact on your objectives. I think it’s the word “risk” that throws many people off. For many people the term “risk” has negative connotations; i.e. something bad will happen, I will lose money, get injured, crash my car etc.. Contrary to common perception risk is neither defined as solely a good or bad thing. Risk is simply an event which has the potential to impact on your objectives. The reason we are driven down the negative path and often consider risk as a negative is most likely a result of the human condition where we place a greater emphasis on the protection of loss than the attainment of a gain. Let me give you a quick example, what would impact you greater on your project: doing a mistake and losing a $1000 or making an improvement and gained a $1000? The majority of people will be more emotive at the thought that they lost money than gained money. Working within organisations we are by default conditioned to cover off on the dangers prior to commencing something, doing a risk analysis. For many projects this is the due diligence prior to commencement. But how often do we hold off projects until we do an opportunity analysis? We can all look at a project and rattle off thousands of negative risks. Simple example; my project is to build a website with an ecommerce capability. So the negative risks may include:
Positive risks are a bit harder to identify, but with a little creative thinking we can all get there. So this is when the divergent thinking stuff comes in- the video on this link will help with that. A good way to start thinking about positive risks is think about the opportunities presented as a result of doing this project and how they may affect you in a good positive manner, for example;
A good starting point for the identification of risk is performing a SWOT analysis, specifically the opportunities and threats. As if you think about it, opportunities are positive risk events and threats are negative. Combining the SWOT with a PEST (Political, Economical, Socio-cultural and Technological) analysis works well. Use these as headings when looking at opportunities and threats and scan each environment in turn; what Political risks are there for our ecommerce website project: Opportunity (Positive Risk)
Threats (Negative Risk)
Is positive risk too much of a good thing?Now here is where it gets confusing. There is a lot written about the association of positive risks with “too much of a good thing”. Personally I don’t agree with that train of thought as most of the examples presented are just badly worded and in fact are actually negative risks. So let’s talk about the most common example out there: Too much business. Yes, I’m being serious. In many sources a positive risk is exampled through having too much business; this takes different shapes based upon the context. So in our example of an eCommerce website that definition of positive risk maybe that our website becomes so popular that the server crashes- whilst I’ll explain why I don’t agree with this, it is one of the most widely used explanations. The reason I don’t subscribe to this logic. Well if you break it down there is a risk, but not a positive risk; a plain old boring negative one. That is the risk of our server crashing- that is the risk event. The fact that it was due to too much traffic is actually the cause. Just like there could be an infinite number of causes for this risk event; the hosting company makes a mistake, they get hacked, they overload their servers, etc. These are causes as they lead to the event which impacts on your objective- most likely keeping the website operational. The fact may be that when you identify an opportunity it can actually present a derivative risk. So yes a positive risk (opportunity) can actually turn into a negative if not properly managed. For the website example above, if we had identified the opportunity that we may get 50,000 people to our site and if so our server may crash. Then we should manage the associated negative risks by upgrading our server (or other methods) to harness the opportunity.
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When the impact of an event is negative it is considered a risk when the impact is positive?
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