Positive Risk vs Opportunity
I’ve never been a fan of the idea of ‘positive’ risk.
It’s a niche idea only found inside the risk and project management communities, and goes against every definition, and the general public’s usage, of the word ‘risk’.
Merriam-Webster defines risk as:
The Oxford English Dictionary defines it as:
Loss, injury, hazard, adverse, unwelcome….. not a single word that suggests a ‘positive’ aspect of risk.
And when we as project professionals use the word to suggest a ‘positive’ connotation with our stakeholders (NON-project people) we just create problems for ourselves, and the project community. We already struggle with gaining acceptance and understanding of more commonly understood terms like value, charter, plan, etc. When we then try and use a word in a way that runs directly counter to the way the entire rest of the world uses it, well….. it’s not going to reflect well on us.
We often see ‘positive risk’ explained as a synonym for ‘opportunity’. Negative risks are ‘threats’, positive risks are ‘opportunities’, and these represent the ‘uncertainty’ in projects. But rather than try and introduce the idea of ‘uncertainty management’, we stick with ‘risk’ management and then try and change a definition. It’s not going to work.
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Where I think we need to shift is to promote the idea that risks are the result of the ‘pursuit’ of an opportunity or goal.
Risks come about as a potential consequence of ‘pursuing an opportunity’. We pursue opportunities in order to achieve goals, and risks are those things that may prevent us from achieving them.
You invest your money in the stock market or real estate in the pursuit of more money (the goal), so you look for an opportunity and pursue it, while taking the ‘risk’ that it may fail. We launch a business because we have a goal and see an opportunity to achieve that goal - to fill a need, make money, provide a service, create something, etc. So we pursue the pursue the opportunity to achieve the goal, and we take the risk that we may not achieve it. The ‘opportunity’ is the positive aspect of the ‘pursuit’, and the risk is the ‘negative potential’ of the pursuit.
If there is no opportunity, there is no risk. If you don’t pursue the opportunity, there is no risk.
Now, some will argue that new ‘opportunities’ will occur in the course of the pursuit of the original goal, and we should be prepared to capture/exploit those. And they’re right. But that’s not the same as a ‘positive risk’. That’s a ‘new opportunity’ that, if we choose to pursue it, will bring with it its own new set of ‘risks’.
And this is where I think much of the (misguided) thinking around differentiating risk as positive/negative, or threat/opportunity lies. The current ‘best practices’ are promoted as ‘manage risks AND opportunities’. Have a ‘risk register’ for both - “if a risk presents we do X, if an opportunity presets we do Y’. But we can’t separate them. Every new opportunity presents a new set of risks associated with pursuing that opportunity. You can’t have an opportunity without risk, and you won’t generate a risk without pursuing an opportunity.
Risk and opportunity are two sides of the same coin, but they’re not two sides of ‘risk’.
as always, comments and feedback welcome
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3 个月Trevor K. Nelson Hi Treveor, thanks for the thought-provoking article! Yes you are right, Risk is a very misleading term as most people associate it with Negativity, and dictionaries do so. In the Health and Safety world, all Risks are Negative due to impact on health. But in Project Management world, pursuit of objectives include "uncertainties" which create “Risks” that have either a negative impact “Threat” or a positive impact “Opportunity”. To put it in equations: Uncertain event = Risk = Probability% + Impact ($ or Time) Positive Impact = Opportunity Negative Impact = Threat (or Hazard if it is related to life or health or damage to property) Some Risks (or uncertain events) have mostly negative impact while others have potential to lead to a positive or negative impact depending on how the situation unfolds. For example, if there is uncertainty about inflation or interest rates which might affect how much the project will cost; this implies that the cost of the project could go up or down depending on how the financial situation evolves. If inflation or interest rates go up, then the risk impact is negative (i.e. Threat); on the other hand, if they go down, then the risk impact is positive (Opportunity).?
Experienced Project Leader | IPMA Level C | PMP | Prince2 | Delivering Excellence in High Impact Projects for Vestas
5 个月Thanks for sharing! Excellent post and resonates very well ??
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5 个月Society for Risk Analysis: “Overall qualitative definitions: 1. Risk is the possibility of an unfortunate occurrence 2. Risk is the potential for realization of unwanted, negative consequences of an event 3. Risk is exposure to a proposition (e.g., the occurrence of a loss) of which one is uncertain 4. Risk is the consequences of the activity and associated uncertainties 5. Risk is uncertainty about and severity of the consequences of an activity with respect to something that humans value 6. Risk is the occurrences of some specified consequences of the activity and associated uncertainties 7. Risk is the deviation from a reference value and associated uncertainties” https://www.sra.org/wp-content/uploads/2020/04/SRA-Glossary-FINAL.pdf
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5 个月This all works so much better if we call it uncertainty management - threats and opportunities fall out naturally then.