This is the second article of our series on Project Risk Management
In this article we will discuss key definitions related to a common debate on risk management, which is: are risks always threats or we can consider opportunities as risks as well?
Two School of Thoughts
When we discuss risk management or project risk management, there are two main school of thoughts.
The first school of thoughts view risks as threats; always. Human nature lead people to think of a “risk event” as “threat”, “danger”, “hazard”, or any other word that reflect negative or bad situation.
Another school of thoughts; mostly reflecting a business perspective, view “risk events” as uncertain events that could have negative or positive consequences on the objective of the task, project, or mission that we are undertaking.
Regardless of which school one follows, we need to shift our paradigm to think of positive and negative consequences to events on our projects and our lives.
If you subscribe to the second school of thought, then you already “understand” or “accept” that risks could be a threat or an opportunity.
On the other hand, if you are from the first school, then you can continue to think of risk as bad but you also need to think of opportunities.
Current Reality of Practices
Based on our observations from numerous project management and project risk management classes that we have led, the focus is mostly limited to risk being threats … and therefore risk management is about the threats to the projects. Even in situations where people accept that risk management is about the threats and opportunities they maintain a focus on the threats and ignore the opportunities. This is what we call the “wishful thinking syndrome”, meaning since it is an opportunity so it is OK if it happened … forgetting that a risk is uncertain and may or may not happen.
If we accept the concept that risks are threats and opportunities; then we can discuss risk and opportunity management. Here again, the vast majority of participants struggle with this concept and could not relate to what would be an opportunity.
Missing Out on Opportunities
If an organization focuses on the threats only – then we could be missing out on great opportunities.
For example, (simplistic example) if there is an opportunity that would allow us to save three weeks on a project and a threat that could cause us to lose a week. Where would you focus?
- If the threat happen but not the opportunity – we lose a week (bad)
- If they both happen – OK we gain two weeks (gain three, lose one – net gain of two)
- If we can eliminate the threat and ensure that the opportunity happen – then we gain three weeks
In this case, do you think you can still afford to miss out on the opportunities?
How do we change the mindset?
Take a look at the next image, is the shark a threat or an opportunity? If you are afraid of sharks then you view them as threats. On the other hand, there are people who makes a living from diving and swimming with shark. So once again, is this a threat or an opportunity?
We will be touching on project risk management (threats and opportunities) in future articles.
Please share your thoughts.