What Are Positive Risks And Negative Risks - Positive And Negative Risk Examples - 2024 Guide

Understanding the dynamics of risk is pivotal in any endeavor, whether it be in project management, business operations, or strategic decision-making. Risks are inherent in every aspect of life and can significantly influence the outcomes of our endeavors. Within the realm of risk management, risks are often categorized into two main types: positive and negative.

Positive and negative risks represent the dual nature of uncertainty, encapsulating both opportunities and threats that organizations may encounter. Positive risks, also known as opportunities or upside risks, present the potential for beneficial outcomes and favorable developments that can propel projects forward and enhance organizational performance. Conversely, negative risks, often referred to as threats or downside risks, pose the risk of adverse consequences and detrimental impacts that can impede progress and undermine success.

In this exploration, we delve into the dichotomy of positive and negative risks, examining their definitions, characteristics, and implications within various contexts. By dissecting the nature of these risks, we aim to elucidate their significance in risk management practices and highlight the strategies employed to harness opportunities and mitigate threats effectively. Through a nuanced understanding of positive and negative risks, organizations can navigate uncertainties with greater foresight, resilience, and adaptability, ultimately fostering sustainable success in an ever-changing landscape.

What is risk in project management?

PMBOK book defined risk as an unexpected action or matter -if it happened- it would directly affect one of the project’s main goals at least. At Bakkah inc institute for training and Consulting, we define risk as a threat or opportunity at the same time, it could be a threat if it caused damage, loss, or struggle, and it could be an opportunity if it achieved revenue increase or if it reduced the used resourcing.

There is a wrong perspective even for some projects management experts, they are considering the risk as something negative leads to project failure, and all efforts have been directed this way, but it also could be positive as well by being an opportunity that achieves benefits to the project or the organization.

Both types of risk are affecting in the results of the project, that’s why prediction and expectation are being summoned at an early stage, the planning stage. For the project management to be able to control all threats and take the right decisions, there should be monitoring and following-up during the project’s life circle.

Definition of Positive risk

Positive risk, also known as an opportunity or an upside risk, refers to the potential for beneficial outcomes or opportunities that may arise during the course of a project or within an organization. Unlike negative risks (threats), which pose potential harm or adverse impacts, positive risks have the potential to result in favorable outcomes, such as increased profits, improved efficiency, enhanced reputation, or the realization of strategic objectives.

In essence, positive risks represent situations where there is uncertainty, but the potential consequences are advantageous rather than detrimental. Identifying and exploiting positive risks is an essential aspect of risk management, as it allows organizations to proactively leverage opportunities to achieve their goals and gain competitive advantages. Therefore, positive risk should be recognized, assessed, and managed effectively to maximize the potential benefits and enhance overall project or organizational success.

Definition of Negative risk:

Negative risk, also known as a threat or downside risk, refers to the potential for adverse outcomes or unfavorable events that may occur during the course of a project or within an organization. These risks represent situations where there is uncertainty, but the potential consequences are detrimental rather than advantageous.

Negative risks can manifest in various forms, such as project delays, cost overruns, quality issues, legal disputes, market downturns, or reputational damage. They have the potential to hinder the achievement of project objectives, disrupt operations, and negatively impact organizational performance.

Identifying, assessing, and managing negative risks is a critical aspect of risk management, as it allows organizations to anticipate and mitigate potential adverse events before they occur. By implementing risk mitigation strategies and contingency plans, organizations can minimize the likelihood and severity of negative risks, thereby safeguarding their projects and operations against potential harm and enhancing their overall resilience and success.

Negative risks with examples:

Negative risks or ‘’ threats’’. Mentioning this word appears that it's bringing negative results and this is most unlikely to the project managers who are trying their best to avoid it.

Example of a negative risk: Delays in the delivery of the project or passing to the planned costs or anything else could affect the objectives of the project is considered a negative risk or "threat.”

Positive risks With examples:

Positive risks or ‘’opportunities’’ is leading to positive results, and this is a likely risk to all project managers who are trying to achieve it.

Examples of a positive risk: ending the project before delivering date, or increasing the return on investment ROI.

Is it possible for the positive risk to turn negative?

Well, unless it wasn’t planned and followed up carefully, yes it would turn negative. For example, if a telecommunication company is implementing a project for expanding to accommodate a large number of new subscriptions. They have done preparing for receiving and installing new lines services while they haven’t done installing houses units and extra switches.

The company representatives considered this risk as a good chance to receive new clients at an earlier time and started a promotional campaign that quickly succeeded to gain clients, a thing that turn it from a great opportunity to a real threat because the service was crashed and unable to handle that much of subscriptions, the thing that may lead to crush the company reputation and lose its old and new clients.

Negative Risks Response Strategies

There are some strategies that could help you respond to the negative risks such as:

1. Avoid Reducing threats and danger by deleting or editing some of the project's activities. Example: A delay happened during project delivery, it has been fixed by adding new employees to the team.
2. Transfer Transfers threaten responsibility to a third party, and this is a strategy that has always been used when risk is related to financial problems, and the third party is often the insurance companies. Example: Contracting company that works under fickle weather most of the time and is afraid to delay delivering because of rain and storms or causing damage to their materials and machines, that's why they use insurance companies to insure these subjects and avoid any possible loss.
3. Mitigate Reducing the possibility of having any danger or reducing its effect. Example: doing lots of tests for quality or dealing with a string supplier to guarantee the continuity of supply.
4. Acceptance: This is a strategy that can be followed in both positive and negative risk situations, the error is accepted and there are no actions until it happens. This strategy is applied as a final option. Example: if this possible threat could happen with damage of 1000$ when can be avoided by losing 5000$, in this case, it would be worth it not to take any action and deal with it as a positive or negative risk.

Positive Risks Response Strategies

There are some strategies that could help you respond to the negative risks such as:

1. Exploit Make sure to achieve this risk or opportunity and invest it to increase institution revenues and developing performance, and make sure it happens by editing some of the project's activities Example: some of the team members have the knowledge to use a new technique that could reduce delivering time to this project by 20%, they train there other members to use this technique.
2. Share Transfer all or part of the opportunity to a third party using outsourcing experts in this field. Example: having an opportunity to enter the market by developing a new product, but it needs to be a quick process, in this case, a contract should be signed with companies or experts to make this product as soon as possible.
3. Enhance Increase the possibility of making the opportunity happens or increasing its effect. Example: The allocation of additional sources of tasks, earlier negotiating with stakeholders to get the best price.
4. Acceptance: As Mentioned Above for both positive and negative risk situations, the error is accepted and there are no actions until it happens.

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