Should You Factor Positive Risk into Project Planning?

Aug 22

Should You Factor Positive Risk into Project Planning?

Best Practices, Project Scope Management

Summary:
Even though you may commonly think of project risks as having a negative connotation, you can also use risk management to identify and quantify potential positive risk. You can determine if you want to accept the risk after understanding the risk plan, the chances of success, the payoff if you are successful and the impact if you are not successful.

...

First, here is a quick recap of the traditional notion of risk. Risks represent potential events or circumstances that exist in the future that could have a negative impact on your project. They are not problems today (if they were, they would be issues, not risks), but they have the potential to become problems in the future. On the other hand, they are not definite problems. There is a chance that the risk will occur, but there is a chance it will not. You determine the risks that you need to manage by identifying the risk event, determining the potential impact to your project and determining the probability that the risk event will actually occur. When you are done with this exercise, you look for high-risk events and put together a plan to deal with each one.

Let’s take an example. Say you have a supplier that you are counting on to provide raw materials to build a prototype. However, the supplier has a union contract that is expiring in the next 60 days. There is a risk that the supplier will have a strike that will disrupt shipments. You need to identify this as a risk, estimate the probability of occurrence (perhaps this will increase or decrease over time), determine the impact to the project if it occurs, and then put together a plan to minimize the impact on the project if it occurs.

Now let’s get to the concept of positive risk. After all, isn’t everyone supposed to be an intelligent risk taker? Isn’t it right to push the envelope? Isn’t it better to have tried and failed than to have never tried at all?
These statements get to a difference between how risk is typically identified from a project management perspective, and how it is utilized in culture. The concept of risk in language is broader than how it is typically used in project management. This broader definition takes into account the concept of positive risk, or opportunity risk.

Negative risk is represented by potential future events that could impact your project negatively. In general, they are to be avoided (although there are different risk strategies, depending on the risk we are dealing with). Positive risk, on the other hand, refers to risk that we initiate ourselves because we see a potential opportunity, as well as a potential for failure. This is what we are referring to when we say that we are intelligent risk takers.

A project looking at new technology may be a good example. Let's say that you have a software development project that is scheduled to take 12 month to complete. Your business client would rather the project be delivered earlier, and would get more value if it were delivered earlier, but they understand that 12 months is how long the project will take.

One of your team members has an idea. If you utilize a new software-testing tool, it is possible that you can deliver the project in nine months instead of twelve months. If this were a guaranteed solution, you would jump on it. However, there is risk, since it is the first time you have used the tool. There is a lack of expertise and a start-up learning curve. It is possible that if the tool does not work out, the project could end up taking 15 months to deliver. What would you do?

Of course, you don’t have enough information to make the decision now. However, this example illustrates the concept of opportunity risk. The business client will accept delivery in twelve months. If you decide to use the tool, it is a risk you are introducing yourself, based on an evaluation of the chances of success, and the impact of success, versus the chances of failure and the impact of that failure. When it is said that we are intelligent risk-takers, it is these types of decisions that are being addressed.

28 comments

§ wipsusa said on : 12/05/10 @ 04:34
Hey, I just discovered your web site via bing and I'm really delighted I found your website. Thank You.
§ lida dai dai hua said on : 12/09/10 @ 05:04
Super-Duper web site! I'm loving it!! Will arrive again once more - taking you feeds also, Thanks. Hello. Terrific position. I did not expect this on a Wednesday. This is really a great story. Thanks!
§ Darmowe Kasyno Online said on : 12/13/10 @ 06:56
You are professional.
§ Hazard W Internecie said on : 12/18/10 @ 17:32
Thatâ€™s incredible!
§ wÃ³zki wielofunkcyjne said on : 12/22/10 @ 15:58
An interesting discussion is worth comment. I think that you should write more on this topic, it might not be a taboo subject but generally people are not enough to speak on such topics. To the next. Cheers
§ chronograph watch first timers said on : 12/30/10 @ 23:21
Hello there! Would you mind if I share your blog with my myspace group? There's a lot of folks that I think would really enjoy your content. Please let me know. Thank you
§ Bonusy Kasyna said on : 01/03/11 @ 12:43
Thanks for this useful article.
§ Samanta Harries said on : 01/09/11 @ 15:02
Thanks for knowledge and keep on posting such valuable articles. Your website design is super as well!
§ Enola Pagliuca said on : 01/14/11 @ 09:32
Hi i would like to thank you for giving us that very informative post. it's really a very interesting post.
§ Emmanuel Beisner said on : 01/16/11 @ 16:56
Hello i would like to thank you for giving us that very informative post. it's really a very interesting blog post.
§ Sally said on : 01/16/11 @ 20:52
*There are some interesting points in time in this article but I donâ€™t know if I see all of them center to heart. There is some validity but I will take hold opinion until I look into it further. Good article , thanks and we want more! Added to FeedBurner as well
§ Sally said on : 01/16/11 @ 23:35
*I discovered your blog site on google and check a few of your early posts. Continue to keep up the very good operate. I just additional up your RSS feed to my MSN News Reader. Seeking forward to reading more from you later on!â€¦
§ facebook of sex said on : 01/20/11 @ 18:55
Well written blog post, and i also currently understood that some groups are more inclined than others (since we're all unique) would share the same idea. I hope you save this blog working well.
§ facebook sex said on : 01/22/11 @ 16:21
Well written review, and that i already understood that some groups are more inclined than others (since we're all different) would share the same idea. I hope you keep this blog operating well.
§ Fiona Perisho said on : 01/25/11 @ 10:52
Hello. fantastic job. I did not imagine this. This is a impressive story. Thanks!
§ Walton Deshotel said on : 01/25/11 @ 21:54
Amazing stuff!! Going to take a good amout of time to absorb your story.
§ Loan Kalista said on : 01/26/11 @ 07:23
Great writing. Will take some time to toy with your info=)
§ Kasyno Online said on : 01/31/11 @ 02:58
Iâ€™ve been visiting your blog for a while now and I always find a gem in your new posts. Thanks for sharing.
§ Hazard said on : 02/01/11 @ 07:46
Thanks for this useful article.
§ babyphatclothing said on : 02/03/11 @ 11:48
very nice post, i certainly love this website, keep on it
§ facebbok of sex said on : 02/04/11 @ 05:46
Well written report, and i currently understood that some groups are more inclined than others (since we're all unique) would share the same idea. I hope you keep this blog operating well.
§ Life Plus said on : 02/08/11 @ 17:01
How did you make this blog site look this cool! Email me if you can and share your wisdom. I'd appreciate it.
§ Jospeh Lababit said on : 02/13/11 @ 06:35
With havin so much written content do you ever run into any problems of plagorism or copyright infringement? My blog has a lot of exclusive content I've either authored myself or outsourced but it looks like a lot of it is popping it up all over the internet without my authorization. Do you know any techniques to help prevent content from being ripped off? I'd genuinely appreciate it.
§ Ramiro Shetter said on : 02/13/11 @ 19:31
I loved as much as you'll receive carried out right here. The sketch is attractive, your authored material stylish. nonetheless, you command get bought an nervousness over that you wish be delivering the following. unwell unquestionably come more formerly again as exactly the same nearly a lot often inside case you shield this increase.
§ Karyn Gaukroger said on : 02/21/11 @ 16:14
I do not even know how I ended up here, but I thought this post was great. I don't know who you are but definitely you are going to a famous blogger if you are not already ;) Cheers!
§ Candis Catanzaro said on : 02/22/11 @ 01:16
Youre not the regular blog writer, man. You surely have something important to contribute to the net. Such a special blog. Ill come back again for more.
§ Water Cooler %0B said on : 02/23/11 @ 12:59
,-- i always love to read about stuffs like this one ,'~
§ billigt hair extensions said on : 02/23/11 @ 19:33
I went over this website and I conceive you have a lot of good info , saved to favorites (:.