2.4.4T Positive Risk

Overview (2.4.4T.P1)

Risks are future events or conditions that have some probability of occurring and some impact to your project. You usually always think of risks as being bad and you put a plan in place to make sure the risk goes away.

However, is it true that all risks are bad? Let’s say your project was going to utilize a new tool or new technology. Would it make sense that your project was riskier than a similar project that is using current technology?

On the surface this would seem to be correct. Your team probably understands the current technology better, the current technology is probably more stable and you probably have a lot more support infrastructure. The new technology is not understood as well, has more opportunity for problems and you don’t have nearly as solid of a support infrastructure in case something goes wrong. Even without understanding the specific technology in question, it makes sense that projects with new technology would be somewhat more risky that a similar project that uses current technology.

If it is true that all projects are generally more risky when you use new technology, why would you ever undertake a project with new technology? The answer is that you perceive there to be a benefit to your project. In other words, the potential impact to your project is a positive. This still meets the definition of risk.

There is an impact to your project. Normally risk events have a negative impact on your project. However, with positive risk there is a potential positive impact.

  • There is a probability of the event occurring. This is still the case with positive risks. In the prior example, if the benefits of moving to new technology were guaranteed, you could make the decision to move forward with 100% confidence. However, usually the benefits are not guaranteed. The technology, or the implementation of the technology, could turn out bad, in which case you might be worse off than when you started.

Positive risk is also called “opportunity risk”. In these instances, the project manager or project team may introduce risk to try to gain much more value later.

You may have also heard the idea that you should be a risk-taker. In many organizations they modify this by saying that you should take “intelligent” risks. This concept leads to the same question. Why would you want to be a risk-taker if risks were always bad? Of course, the reason is that there are also many opportunity risks.

One of the key aspects of positive risk is that you put yourself in a position to take on the risks. Negative risks are potential events that can happen to you. They are the ones that you want to avoid or eliminate. Positive risks are those that you knowingly take upon yourself. They are not out there ready to get us. They are the risks that you step up to since you perceive there to be advantages to do so.

Different organizations have different tolerances for risk. If you take an intelligent risk and you fail, what happens? If your organization rewards people that take risks and are successful, and they punish people that take risks and fail, then they are really risk averse. It is easy to reward the people that take risks and succeed. It is the situation of the risk-taker that fails that determines whether your organization is really risk averse or risk tolerant.

Generally when you are doing risk management on projects you are talking about potential negative events. However, you can also identify the risk events that lead to positive outcomes. These opportunity risks can be managed the same way as negative risks except that instead of eliminating the risks, your risk plan will include activities designed to give you the best chance that the risk event will come true.