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About this lesson

Understand the difference between positive and negative risk.  Learn the major steps of project risk management. 

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Positive and Negative Risk.docx
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Quick reference

Positive – Negative Project Risk

A project risk is any uncertain condition or event that could either be a threat to the project’s ability to achieve project objectives (negative) or an opportunity to improve the project’s ability to achieve the project objectives (positive).

When to use

Risk management is an ongoing activity that begins at the time of project initiation and continues throughout the lifecycle of the project.  The earlier that positive and negative risk can be identified, the better. 

Instructions

Identify risk as soon as possible.  More time increases the ability of the project to take advantage of positive risks.  In fact, many times positive risks are not even recognized as an opportunity until they are past the point in the project when they could have been leveraged.  More time also increases the ability of the project to prepare for and respond to negative risks.  Negative risks occurring late in the project are almost always a major impact because there are so few options left to the project team to respond that they are forced into a delay, an overrun, a defective result, or a combination of those three.

Product risk and project risk are two different perspectives on risk. Both must be managed by the project manager and core team.  Product risk normally refers to the risk that the project results are not acceptable to the stakeholders for use in the business or application.  Project risk is normally associated with cost or schedule risk and focuses on how the team manages the triple constraints of scope, schedule and resources.

Other modules in this training program will go into these steps in more detail.  This is just an overview of the required steps for managing project risk.

  1. When setting project boundaries, identify those boundaries that are most sensitive to risk.
  2. During project planning, and again at the start of each phase, conduct a team meeting to identify project risk – both positive and negative.
  3. Analyze the risks to determine which ones require a response.
  4. Prepare the risk response plans.
  5. Implement the risk response plans.

Hints & tips

  • Make risk identification and risk response planning an agenda topic at team meetings to reduce the likelihood that risks are not overlooked.
  • People have a tendency to dwell on the negative risks and not consider the positive risks. To identify positive risks, ask, “What would have to happen for us to complete the project early (or under budget)?”
  • Negative and positive risks often have a “flip side” that would turn the one into the other.  For instance, if a negative risk is project personnel availability may be delayed, a positive risk is early assignment of project personnel.
  • Positive risks normally must be identified early in the project to take advantage of them.  Otherwise the negative impact of changing the project can outweigh the benefit of the positive project risk.
  • At the time of initial project plan approval and at the beginning of each phase, review the risk response plans with management for the positive and negative risks that the project team has determined to be significant for that phase.   This reduces the likelihood of surprises for management and allows the team to get approval for unique or unusual risk response strategies.
  • Risk: “An uncertain event or condition that, if it occurs, has a positive or negative effect on one or more project objectives.” PMBOK® Guide

This definition is taken from the Glossary of the Project Management Institute, A Guide to the Project Management Body of Knowledge, (PMBOK® Guide) – Sixth Edition, Project Management Institute, Inc., 2017.

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  • 00:05 Hello, I'm Ray Sheen.
  • 00:06 You know all projects have risk.
  • 00:08 I'll be talking about project risk management for the next few minutes.
  • 00:14 The Project Management Body of Knowledge, the PMBOK guide defines risk as,
  • 00:18 an uncertain event or condition that, if it occurs, has a positive or
  • 00:22 negative effect on one or more project objectives.
  • 00:25 As I said, all projects have risks.
  • 00:28 There are uncertain factors in every project and
  • 00:30 a result of their outcome is risk to the project.
  • 00:33 In fact, one could argue that all project management is risk management.
  • 00:38 Every project management tool or process is to identify or mitigate risk.
  • 00:43 We are unable to eliminate risk, but we can manage risk.
  • 00:46 There are two types of project risk, negative risks,
  • 00:49 threaten the project's ability to achieve its objectives.
  • 00:52 And positive risks are opportunities to enhance
  • 00:55 the ability of the project to achieve its objectives.
  • 00:58 Let's talk about negative risk first.
  • 01:00 This is the type of risk everyone thinks about when they think project risk.
  • 01:04 These are threats to the project objectives,
  • 01:07 such as the project results not performing as expected,
  • 01:10 missing the project's scheduled end date or overrunning the budget.
  • 01:14 It's a negative impact on at least one side of the project management triangle.
  • 01:18 There are many reasons why this can happen.
  • 01:20 I will explore those in more details in another lesson.
  • 01:23 Some of the reasons are because of the type of project, and
  • 01:26 some are because of the way it is managed.
  • 01:29 The impact of negative risks increases during the life cycle of the project.
  • 01:33 A risk that was easy to resolve early in the project is much more significant late
  • 01:38 in the project, because so many decisions may need to be undone and redone, and
  • 01:42 the available time and money left to do the response to the risk is small.
  • 01:47 Now let's talk about positive risk.
  • 01:49 Positive risk are opportunities to enhance the ability of the project
  • 01:53 to achieve its objectives.
  • 01:55 This could be exceeding customer expectations on performance,
  • 01:59 completing early, or underrunning project expenses.
  • 02:02 As with negative risk, opportunities are based upon the type of project and
  • 02:07 the project management approach.
  • 02:09 The ability to leverage positive risks decreases
  • 02:12 during the lifecycle of the project.
  • 02:14 Many risk opportunities have a small window in which they are practical.
  • 02:18 Once that window is closed, the opportunity is gone.
  • 02:21 As the project nears completion, there are few tasks left,
  • 02:24 which means there are fewer opportunities in which to improve.
  • 02:28 So given the importance of risk management,
  • 02:31 let's discuss what a project leader needs to do to manage risk.
  • 02:35 Each of these topics will be covered in a more detail in another lesson.
  • 02:38 This is just an overview.
  • 02:39 First, they need to identify risk factors, that seems obvious.
  • 02:43 But many project leaders never take the time to ask
  • 02:46 what could go wrong on their project or
  • 02:49 what could go right until it's too late, and the risk is already materialized.
  • 02:54 Next, they must analyze and
  • 02:56 prioritize the risks to determine which factors they will take action on.
  • 03:00 Some risks are so minor that they don't need a response.
  • 03:03 Other risks are crushing and need immediate action.
  • 03:06 The risks must be prioritized.
  • 03:08 Once the leader decides which risk factors they will take action on,
  • 03:12 they must develop the risk response plans.
  • 03:15 It's not enough to worry about the risk, you must come up with a plan for response.
  • 03:19 And, finally, they need to implement those risk response plans into the project plan
  • 03:23 to ensure that the appropriate actions are taken.
  • 03:27 One last comment on this area.
  • 03:29 I'd like to clear up the difference between product and project risk.
  • 03:33 Some organizations myopically focus on one and not the other.
  • 03:37 Product risk is the term we use for
  • 03:39 a failure of the project result to meet its performance objectives.
  • 03:43 It's a failure of a deliverable.
  • 03:46 Whether your project creates a product or a system or it does something else,
  • 03:50 the product risk is the risk of whatever you have developed doesn't work.
  • 03:55 This risk could include safety, efficacy, or complaints by the users.
  • 04:00 These risks need to be proactively managed by the leader or
  • 04:03 core team member who is the subject matter expert in their area.
  • 04:07 The other category of risk is project risk.
  • 04:11 Project risk is the risk of staying within the constraints of scope, schedule, and
  • 04:15 resource boundaries for the project.
  • 04:17 These risks undermine the ability of the project from a business perspective
  • 04:21 such as missing a product launch date or
  • 04:24 overrunning on a project budget until it has a negative return on investment.
  • 04:29 These risks must be actively managed by both the project leader and
  • 04:32 the project core team.
  • 04:34 Don't misunderstand.
  • 04:35 Both sets of risks must be managed,
  • 04:37 they are both vital to the overall project success.
  • 04:43 All projects have risk, both positive and negative.
  • 04:46 Project leaders should be proactively managing the risks on their project.

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