Friday, November 4, 2011

Opportunity or risk?

Opportunity or risk?

Not to be too dry, let's nevertheless acknowledge that the 'official' definition of risk, as given by PMI PMBOK, is that a risk is an event or condition that could have either a negative or positive impact on project objectives. And, if you follow the thread in the PMBOK gloassary, 'opportunity' is the name given to the positive impact thread. Now, the ISO 31000 standard for risk management does not go quite as far, defining risk as an uncertainty that affects project objectives

So, what is opportunity? Risk, or just a postive effect? And, does it matter, really?

Well, yes, actually it does, for these reasons:

a. Risk has it's own register of possible and probable events and conditions, largely not in the performance management baseline (PMB).  Thus, most risks are 'off-baseline'.  And the reason is simple: risks are generally thought of as threats to project success, PMI's glossary not withstanding.  The point of risk management is to mitigate threats to the PMB.

b. Opportunities, equally off-baseline, usually mean a change in scope.  Thus, whereas an opportunity may thought of as scope creep, the general disposition is to accept worthwhile opportunities, not mitigate against them.

c. Incentives generally follow success, but risks are not about success.  Thus, risks are not about incentives.  Money tends to focus the mind, so focus is often not on the risk register.  On the other hand, an opportunity may bring with it not only success but reward for foresight

d. Opportunities naturally find their way into the change management system, and are usually dealt with in an entirely different workflow from the risk management system. 

The PMBOK, in Chapter 11, offers four response ideas for risks: avoid, accept, transfer, and mitigate. 

The PMBOK offers a different list for opportunities: exploit, share, enhance, and accept.

However, when discussing this recently with my risk management students, one came up with three others that I think are quite clever:
IGNORE because it was out of scope; INFORM the outside party that it impacted so they can run with it; or INCLUDE in the project because it was a better way to achieve the project objectives.

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1 comment:

  1. John, Here's some background on the Risk and Opportunity issue,

    The first issue is that Risk and Opportunities are not interchangeable. Opportunity is not positive risk.

    The second issue is that opportunities are not equally available throughout the program.

    I'm sitting on the NDIA Risk and Opportunity committee next week in Bethesda. Another paper is from Ed Conrow,

    So here's some of the approaches from your post:

    a. The Risks identified at contract award are on baseline and in the PMB.

    b. Opportunities are called "fast tracking" and in many domains (NASA) they are also on baseline. They start with the proposal as alternatives to the standard path.

    c. Incentives do follow risk and risk retirement. This is common in the DOE world of D&D of nuke sites.

    d. This is the point of discussion next week.

    I'd personally not start with PMBOK for risk management, instead the DOE O 413 series and the NASA risk management processes.


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