Positive and negative risks and how to handle it
Written By : Bakkah
PMBOK book defined risk as: 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, lost, or struggle, and it could be an opportunity if it achieved revenue increasing or if it reduced the used resourcing. There is wrong perspective even for some of projects management experts, they are considering the risk as something negative lead to projects fail, and all efforts has been directed to this way, but it also could be positive as well by being an opportunity that achieve benefits to the project or the organization. Both types are affecting in the projects results, that’s why prediction and expectation are being summon 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.
How would deal with risks?
Negative risks or ‘’ threats’’. Mentioning this word appears that its bringing negative results and this is most unlikely to the projects managers who are trying their best to avoid it.
Example about the 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 or ‘’ opportunity’’ is leading to positive results, and this is a likely risk to all projects managers who are trying to achieve it.
Example about the positive risk: ending 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 large number of new subscriptions, and they have done preparing for receiving and installing new lines services while they haven’t done installing houses units and extra switches, and they considered that this is a good chance to receive new clients in an earlier time and started a promotional campaign that quickly succeeded to gain clients, the thing that turn it from 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 and Positive Risks Response Strategies
|#||Negative risk ( threat )||Positive risk ( opportunity )|
|1||Avoid Reducing threat and danger by delete or edit some of the project's activates. Example: A delay happened during project delivery, it been fixed by adding new employees to the team.||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 activates Example: some of 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||Transfer Transfers threat responsibility to a third part, and this is a strategy that always been used when risk is related to the financial problems, and the third part often be the insurance companies. Example: Contracting company that works under fickle weather most of the time and afraid to delay delivering because of rain and storms or causing damage to its materials and machines, that's why they use insurance companies to insure these subjects and avoid any possible lost.||Share Transfer all or part of the opportunity to a third part using outsourcing experts in this field. Example: having an opportunity to inter the market by developing a new product, but it needs to be quick process, in this case a contract should be signed with companies or experts to make this product as soon as possible.|
|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 supplying.||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.|
Which is a strategy that can be followed in both positive and negative risk situations, the error is accepted and there is no actionsaction until it happens. This strategy is applied as a final option. Example: if this possible threat could happened with a 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.
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