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About this lesson

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

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 one into the other.  For instance, if a negative risk is that project personnel availability may be delayed, a positive risk is the 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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  • 00:04 Hello, I'm Ray Sheen.
  • 00:05 All projects have risk.
  • 00:07 I'll be talking about project risk management for the next few minutes.
  • 00:12 The Project Management Body of Knowledge, the PMBOK Guide,
  • 00:15 defines risk as an uncertain event or condition, that if it occurs,
  • 00:20 has a positive or negative effect on one or more of the project objectives.
  • 00:24 As I've said, all projects have risk.
  • 00:27 There are uncertain factors in every project and
  • 00:30 the result of the outcome is risk to the project.
  • 00:33 In fact, one could argue that all project management is risk management.
  • 00:37 Every project management tool or process is to identify or mitigate risk.
  • 00:43 We're unable to eliminate risk, but we can manage risk.
  • 00:46 There are two types of project risk.
  • 00:49 Negative risks threaten the project's ability to achieve its objectives.
  • 00:53 And positive risks are opportunities to enhance the ability of the project to
  • 00:58 achieve its objectives.
  • 00:59 Let's talk about negative risk first.
  • 01:02 This is the type of risk everyone thinks of when they think project risk.
  • 01:06 These are the threats to the project objectives,
  • 01:09 such as a project results not performing as expected,
  • 01:12 missing the project schedule end date, or overrunning the budget.
  • 01:16 It is a negative impact on at least one side of the project management triangle.
  • 01:21 There are many reasons why this can happen.
  • 01:23 And we will explore those in more detail in another lesson.
  • 01:26 Some of the reasons are because the type of project and
  • 01:29 some are because of the way it is managed.
  • 01:32 The impact of negative risk increases during the lifecycle of the project.
  • 01:36 A risk that was easy to resolve early in the project is much more significant late
  • 01:41 in the project, because so many decisions may need to be undone.
  • 01:45 And the available time and money left to respond to the risk is small.
  • 01:50 Now let's talk about positive risk.
  • 01:52 Positive risks are opportunities to enhance the ability of the project
  • 01:56 to achieve its objective.
  • 01:58 This could be exceeding customer expectations on performance,
  • 02:01 completing early, or underrunning project expenses.
  • 02:05 As with negative risk, opportunities are based in part upon the type of project and
  • 02:10 the project management approach.
  • 02:12 The ability to leverage positive risk decreases during the lifecycle of
  • 02:16 the project.
  • 02:17 Many risk opportunities have a small window when they are practical.
  • 02:21 Once that window is passed, the opportunity is gone.
  • 02:24 As the project nears completion, there are fewer tasks left,
  • 02:28 which means fewer opportunities in which to improve.
  • 02:31 So given the importance of risk management,
  • 02:33 let's discuss what a project leader needs to do to manage risk.
  • 02:37 Each of these topics will be covered in more detail in another lesson,
  • 02:41 this is just an overview.
  • 02:43 First, they need to identify the risk factors, which seem obvious,
  • 02:47 but many project leaders never take the time to ask what could go wrong or
  • 02:51 what could go right until it's too late and then the risk is materialized.
  • 02:56 Next, they must analyze and
  • 02:57 prioritize the risks to determine which factors they will take action on.
  • 03:02 Some risks are so minor they don't need a response, other risks are crushing and
  • 03:06 need immediate action.
  • 03:08 The risks must be prioritized.
  • 03:11 Once the project team decides which risk factors they will take action on,
  • 03:15 they must develop the risk response plans.
  • 03:17 It's not enough to worry about it, we need to come up with a plan for response.
  • 03:22 And finally, they need to implement those risk response plans into the project plan
  • 03:27 to ensure the appropriate actions are taken.
  • 03:29 One last comment in this area,
  • 03:31 I'd like to clear up a difference between product and project risk.
  • 03:36 Some organizations myopically focus on one and not the other.
  • 03:40 Product risk is the term we use for a failure of the project result to
  • 03:44 meet its performance objectives, it's a failure of a deliverable.
  • 03:49 Whether your project creates a product, a system, an event, or something else,
  • 03:54 the product risk is the risk that whatever you developed doesn't work.
  • 03:59 The risk could include safety, efficacy, or compliance risks.
  • 04:03 These risks need to be actively managed by the functional core team member
  • 04:07 who is a subject matter expert on the performance of that deliverable.
  • 04:12 The other category of risk is project risk.
  • 04:15 Project risk is about the risk of staying within the triple constraint of scope,
  • 04:20 schedule, and resource boundaries for the project.
  • 04:23 These risks undermine the viability of the project from a business perspective.
  • 04:28 Such as missing a product launch window or
  • 04:31 overrunning the project budget until it has a negative return on investment.
  • 04:35 These risks must be actively managed by the project leader and
  • 04:38 the project core team.
  • 04:40 Don't misunderstand,
  • 04:41 both sets of risks must be managed for the overall project success.
  • 04:46 All projects have risk, both positive and negative.
  • 04:50 Project leaders should be proactively managing the risks on their project.

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