Risk in Project Management
Managing a project is not only about being in charge of it, leading a team, and making sure everything is delivered on time. Project management is also about risk management. And there are two types of risk in PM, positive and negative risk. But what exactly is risk?
As defined by Oxford dictionary, risk is “A situation involving exposure to danger,”or “The possibility that something unpleasant or unwelcome will happen.”Of course, in terms of project management, it is more than just possibility of loss. It is concernedwith the project’s success, budget, and many other factors which are often determined by the risk management.
Yet risk is not always negative. Even though the word “risk” has rather bad connotations, the risk itself can also be positive. In today’s article, we will take a look at these two types of risks in project management.
Positive vs Negative Risk
| POSITIVE RISK | NEGATIVE RISK |
|---|
| An opportunity to the project | A threat to the project |
| You shouldn’t avoid it but enhance and get the most out of it | Avoid it and eliminate |
| Brings a positive outcome and results in project’s success | Brings a negative outcome and may result in project’s failure |
In general, positive risk is something you should always be open to and even enhance it since it has valuable consequences for your project. Whereas negative risk is the opposite and the worst case scenario for such risk is the lack of success in project delivery.
How to Manage Positive and Negative Risk?
Knowing what the risks of your project are is not enough. You have to know how to manage it in order to lead your work and company in the best direction. There are several ways os risk management, whether it is positive or negative:
| POSITIVE RISK MANAGEMENT | NEGATIVE RISK MANAGEMENT |
| EXPLOIT: Exploiting the risk is about increasing the chances of positive effects the risk may have on your project. It can include varied ways such as using the proper tools or technology. | AVOID: If you see a threat to your project, do what is necessary to lower the risks. It may include such activities as delegating tasks, changing the deadline, increasing the number of people in the team, etc. |
| SHARE:Do you see that the risk is having a big positive impact on your project but you don’t have the resources to boost it? Transfer it or share it with other people or a third party to achieve the best result. | TRANSFER: If there is someone else or a third party to which you can transfer the project, you may want to consider this strategy as your first aid. Don’t forget that there are people who may be better at handling certain negative risks. |
| ENHANCE:If you can, do everything to make the risk even bigger. Invest in better resources, people, or try to deliver your project as fast as you can. | MITIGATE: lessen the risk as much as possible to avoid its negative impact on the project. |
| ACCEPT: If there is nothing you can do about the risk and there is no other way to influence it, accept the final outcome. Wait for it to happen and learn how to work on risk management in your future projects. |
Conclusion
Source: https://novanym.com/blogs/blog
The proper risk management can bring your projects closer to success. It is important to consider every pros and con before delivering the work. The result may vary depending on the right analysis of the risk. If you do not follow the right methods, you will end up with either unsuccessfully finished project and not giving it the full potential, or with a complete failure and the project’s loss. It is worth to spend a while on analysis in order to create the best outcomes.
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Kate Borucka Kate is a freelance translator, copywriter, and a content writer specializing in time tracking software, time management, and productivity. When not researching new software, she's reading books, or spending time outdoors.
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FAQs
What Is Positive Risk and Negative Risk? Positive risks are events that are beyond a company's control, but can actually work in the company's favor, allowing the business to capitalize and benefit from them. In contrast, negative risks are potential events that could harm an organization.
What are positive and negative risks in project management? ›
What Is Positive Risk and Negative Risk? Positive risks are events that are beyond a company's control, but can actually work in the company's favor, allowing the business to capitalize and benefit from them. In contrast, negative risks are potential events that could harm an organization.
What are the four basic response strategies for negative and positive risks? ›
The four main strategies used in positive risk response strategy are exploiting, enhancing, sharing, and acceptance. In other cases, a risk that is a threat must simply be mitigated or minimized. This is known as a negative risk response strategy.
What is the difference between positive and negative risk-taking? ›
Unlike negative risk-taking, positive risk-taking enables people to explore their environments and pursue meaningful goals in a socially accepted way. However, similar to negative risk-taking, positive risk-taking yields the potential for both rewards and costs.
What are the five risk responses to project opportunity positive risk? ›
There are 5 strategies for responding to opportunity risk and they are:
- Escalate.
- Exploit.
- Enhance.
- Share.
- Accept.
Examples of positive risks
- A potential upcoming change in policy that could benefit your project.
- Technology currently being developed that will save you time if released.
- A grant that you've applied for and are waiting to discover if you've been approved.
The PMBOK Guide's five negative risk response strategies – avoid, mitigate, transfer, escalate, and accept – offer a comprehensive approach to managing project risks.
What is the most common risk response in a project? ›
The most common risk response is transfer. PMI defines transfer risk as “… shifting the impact of a threat to a third party.” The definition's use of the word “threat” signals a negative risk. To transfer risk is a deflection of it.
Which is the most preferred risk action for negative risks? ›
Avoid. Risk avoidance is when the project team acts to eliminate the threat or protect the project from its impact. It may be appropriate for high-priority threats with a high probability of occurrence and a large negative impact.
How to write a risk response plan? ›
To begin creating a risk response strategy, identify and quantify potential risks in each project. Calculate the probability of their occurrence and the impact they may have on the project. In doing so, you'll outline the severity of the potential risks and determine what is manageable and what must be avoided.
Positive risk taking is a process which identifies the potential benefit or harm which could result from a particular choice being exercised, reduces the risk of harm and then weighs up the expected benefits against the risk of harm which remains.
What are the three types of risk-taking? ›
But risk-taking can also be positive and lead to new experiences, personal growth, and success. There are different types of risk-takers: those who take physical risks, those who take financial risks, and those who take social risks.
How can I assess and classify risks? ›
Risks are normally classified as time (schedule), cost (budget), and scope but they could also include client transformation relationship risks, contractual risks, technological risks, scope and complexity risks, environmental (corporate) risks, personnel risks, and client acceptance risks.
What are the four basic response strategies for negative risks? ›
Negative Risk Management Strategies
- Avoid. Avoidance eliminates the risk by removing the cause. ...
- Transfer. In the Risk Transfer approach, the risk is shifted to a third party. ...
- Mitigate. Mitigation reduces the probability of occurrence of a risk or minimizes the impact of the risk within acceptable limits. ...
- Accept.
The risk management process includes five-steps: identify, analyse, evaluate, treat, and monitor.
What is an example of opportunity risk? ›
We all experience opportunity risk at its most basic level several times a week. For example, imagine you have enough cash on you for lunch in a new town and you're trying to decide between two restaurants you've never tried. What if you spend your time and money on the first option and it's terrible?
What are positive and negative stakeholders in project management? ›
Positive ones will benefit from project implementation, for example their work will become more effective, more automated, easier, and more fun. At the same time negative stakeholders will have problems once the project is implemented. For example, they will be fired because their job will be done by new software.
What is positive risk management? ›
Positive Risk Taking Framework. 'The goal is to manage risks in ways which improve the quality of life of the person, to promote their independence or to stop these deteriorating if possible. Not all risks can be managed or mitigated but some can be predicted.
What are good risks and bad risks? ›
Every opportunity that creates value can be considered a good risk. Bad risks include ignoring regulations or failing to implement effective policies and procedures. Successful business owners understand when to take a risk and how to balance that decision with the potential reward.
What are the types of risk in project management? ›
At the project level, risks can come from financial decisions, project management strategies, project performance, or external sources. These four risk types have varying consequences based on severity. It is important to consider all four in your risk mitigation strategy.
