I’m a long-time advocate of effective risk management. I’ve done it, taught it, and written about it. That said, formal risk management as described in PMI’s PMBOK® Guide has something that annoys me – conflation of risks (potential negative impact) and opportunities (potential positive impact) and suggesting both are equal fodder for risk management planning and management processes. While I agree that risk and opportunities are related concepts, they tend to emerge and be disposed of at different points in the planning process. In my opinion trying to manage them the same way seems forced and arbitrary.
Identification of risks and opportunities can occur at any time in the project, and I encourage team members to bring either up promptly when they are recognized, but there are natural points in the planning process to focus on risks and generally different points when opportunities emerge.
Exploring and cataloging opportunities tends to occur during optimization while the team is reviewing the preliminary schedule and looking for ways to improve the schedule or use resources most efficiently.
These questions tend to tease out opportunities and generally they are acted upon when they are identified to improve the approach. If opportunities are identified and implemented as part of planning, it diminishes the value of cataloging opportunities as we would risks. Granted there may be some opportunities that we defer acting upon until a time in the future when we would have more data to decide whether it is cost effective to act upon them – and these might benefit from the equivalent of a risk log that we monitor to keep them front of mind. Alternatively, we could add tasks to the plan to decide whether to chase an opportunity and save ourselves clutter in the Risk Log.
Discussing risks with a team is about discussing what could go wrong that would affect quality, cost or schedule. In my experience, this conversation is usually most productive after the schedule has been built and subjected to preliminary optimization. Reviewing the schedule gives the team a focus for the risk conversation. Here there is value in capturing risks that we choose to act upon and those we do not so that we can review our decisions with project sponsors. The risk log is both a monitoring tool and a message in a bottle for our future selves to facilitate reflecting on the wisdom of our decisions about which risks we chose to address and the effectiveness of our mitigation strategies.
The one time in planning when risk and opportunity identification naturally occur concurrently, often missed by less experienced project managers, is conversations about task estimates. When you work with team members to develop 3-point estimates for the resource and schedule aspects of a task there is a natural opportunity to inquire about what would have to occur to for the task to tend toward the best-case estimate (opportunities) and what kinds of things might go wrong that would push a task toward the worst-case side of the range (risks).
For example, imagine we are working to develop an estimate for building a fence. Our subject matter expert tells us the best-case estimate is 2 days, the nominal-case (or “most likely” outcome) is 3 days, and the worst-case is 5 days.
We ask what would need to happen to make the best-case more likely? Perhaps our expert says, “There would have to be no rain and all materials would have to be available at the start of day 1.” This situation might lead to exploring several plan changes to exploit these potential opportunities:
On the other side of the coin, we might ask what could occur that would push the task toward the worst-case scenario? Our expert might reply, “Rain or disagreements about fence placement are the most likely obstacles to timely completion.” This could lead to risk mitigation options such as:
Risks and opportunities that can be addressed when they arise in planning help to optimize the team’s approach, and I support taking advantage of all the good ideas that the team has to offer when possible. Traditional risk management and contingency planning seem better suited to focus on uncertainties that matter to the future of the project that must be documented and monitored until the danger is passed. I find, with rare exceptions, that opportunities are best exploited when they arise.
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