Risk Is Not An Opportunity

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Categories: Risk Management


In my continuing series on commonly held but, in my opinion, highly suspect project management practices, I want to ask the question: Exactly what do the risk analysts do that improves a project's ability to come in on-time, on-budget?

Now, as the firestorm I've just ignited races to engulf me, let me be crystal clear about what I'm asserting. I am not saying that risk management is without value. What I am saying is, once the contingency budget and/or schedule have been baselined, the value of the information produced from risk-analysis techniques drops off dramatically.

U.S. General Dwight D. Eisenhower believed that once you're on the battlefield, all plans were out the window. And, while (most) projects don't approach the level of chaos and mayhem associated with a battlefield, I think his ideas are highly applicable in our works. That's what project managers do; they respond to the changes in circumstances, resources, demands, and hundreds of other parameters, every single working day.

The notion that project management decisions can be quantified and reduced to formulaic responses in most circumstances is absurd, and furthering that approach using excessive statistical jargon does not automatically make it legitimate.

As for the assertion that risk management includes an "upside risk" component--a.k.a. opportunity management--I would like to point to the Unabridged Webster's New International Dictionary, Second Edition. Its definition of "risk" reads, in part, "Hazard; danger; peril; exposure to loss, injury, disadvantage or destruction."

Indeed, nowhere in the definition will you find any reference to any possibility of a positive outcome or environ, much less opportunity. And yet, you see people make the comparison risk management equals opportunity management.

I know the risk management aficionados have had a lot of success re-defining the verbiage associated with their area of expertise in A Guide to the Project Management Body of Knowledge (PMBOK® Guide) space, but isn't there another way of furthering risk management notions without pounding away at the lexicon?
Posted by MICHAEL HATFIELD on: June 25, 2009 02:02 PM | Permalink

Comments

R. Max Wideman
Re: Risk Is Not An Opportunity. Methinks that Michael Hatfield is disclosing his frustrations. Michael can choose to define risk, or not define it as the case may be, any way he wishes - on *his* project. But when a risk event occurs, and in resolving the consequent problems, a good project manager will also look for opportunities (for improvement) - especially those that would not have otherwise been available had the risk event not occurred.

Bill Altman
Project managers tend to look at the bad thinking the good will take care of itself. Risk management seems to focus on what could wrong on a project and the impact and probability and subsequent cost of that risk. Opportunity management is a counter endeavor recognizing that some "good" things can happen and including in the analysis the potential of some upside analysis similar to risk management -- i.e. opportunity management. Risk is not an opportunity but opportunity management might be viewed as the yin to the yang of risk management.

Nigel Chen
I couldn't agree more with Michael on the usage of the term "opportunities". Risks as the word says is no way interchangable with the word opportunities. Nevertheless, I believe that the authors of PMBOK decided to place opportunities under the knowledge area of Project Risks Management due to the similarity in the way we approach and handle risks and opportunities. Therefore, let's not be too bothered about the terminology used in this case? With regards to the comparison of project management and war battle. I feel that we should not draw a direct correlation between them. My reason is as follows: "... project is terminated because its objectives will not or cannot be met, or when the need for the project no longer exists." - Quote from PMBOK We can terminate project should the objectives be no longer valid. However, in battles, we usually cannot afford to abandon the battle and retreat. During battles, objectives or circumstances changes rapidly. The "scope" changes, the "team size" changes, everything changes so rapidly that the recommended "integrated change control" may no longer be valid. War battle does not correlate well with project management and we should not look at them using the same lens.

Tim Morrison
As a pretty keen history buff, I have to think that Eisenhower is being misquoted here, or at least out of context. I see various versions of that quote online. He actually made his career in staff appointments --not battlefield -- commands where strategy and planning are key. I suspect that he believed something along the lines of Von Moltke's maxim that "no [battle] plan survives first contact with the enemy". This is not at all the same as saying that once you start all plans are out the window! It means that you must expect the unexpected and be flexible in your planning and prepared to alter and adapt plans according to how reality presents itself. Thorough contingency planning, through evaluating risks and probabilities, would be key to this. The plan must be good enough to stand up to endless revision, but not disposed of at the first curve in the road.

Bernadine Douglas, MS, PMP
"And yet, you see people make the comparison risk management equals opportunity management."

This phrase is also used with conflict management, in that many people seem to believe that conflicts equal opportunity.

I know my discussion takes this away from the risk discussion, but I just liked the way this was stated.

In all my years of project management (over 10), allowing a conflict to be brought into the open and continue to boil does not always help the situation. So many times, I have seen the situation ultimately break a project team.

There have been some cases where it may have been a benefit to address a conflict from the root, but there was also at least one or two to relationships that were negatively affected and not repairable.

What good was there really in that opportunity?

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