Le (Maria) CaiMaster Student| Northeastern UniversitySunnyvale, CA, United States
When I was taking a risk management course at school, our professor had an exercise with us. The main goal was to distinguish between negative risks (threats) and positive risks (opportunities), which I found rather confusing. For example, community objection in a project - it can be negative, as it will postpone the delivery of your project if they don't agree with it; it can also be positive, as it can give you alternative perspectives on potential improvements.
So, my questions are (feel free to share your thoughts on any of them):
1. As the title says, Do we have to categorize risks as negative or positive? 2. Is it possible that risks can be both negative and positive? 3. Is my example a good way to understand it? 4. If my example isn't a good example, but you agree with point 2, would you provide another proper example? Saving Changes...
If we take the trouble to identify a risk, we usually do so because we expect that if realized it could impact our projects. The impact would usually be positive or negative. I suppose there is a third category which is an uncertain event which, if realized, results in NO impact to a project, but there is no value in identifying, analyzing or communicating those.
When we evaluate risks, we want to look at the cumulative impact - is that positive or negative. A risk might result in a significant negative impact but have some small positive side effects - we'd still treat that as a negative risk.
Risks can also, if realized, generate or aggravate other risks. For example, let's say we are planning to be a vendor at a tradeshow. We anticipate a maximum of 200 attendees coming to our booth over the tradeshow days. A positive risk might be having more people visit our booth that we expected as we'd assume that some percentage of those would buy our products. However, this generates or aggravates risks such as visitors being frustrated if they have to stand in line waiting to speak to one of our staff, or the risk of us running out of promotional materials.
Kiron
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1 reply by Le (Maria) Cai
Aug 23, 2024 12:10 AM
Le (Maria) Cai
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Dear Kiron,
Thank you for your valuable insights. I appreciate your emphasis on the importance of identifying and evaluating risks based on their *cumulative impact*.
As you rightly pointed out, risks can have both positive and negative consequences. However, it's crucial to focus on *the overall impact*, even if there are minor positive side effects.
I also find your example of a tradeshow booth particularly helpful. It demonstrates how a seemingly positive risk (increased attendance) can lead to potential negative consequences (frustrated visitors, material shortages).
Your perspective has helped me to better understand risk management. Thank you for sharing your expertise!
Categorizing uncertainty as + or - is very important in many cases. When approving projects for example, a financial estimate might assume 50% of negative risks will occur and 25% of opportunities, similar to creating a PERT 3-point estimate.
A quantifiable example of how one thing could be both positive or negative is market share captured by a new product. If the product sells more than expected the project will be very profitable, and if less will result in a loss. In that case you could even have a statistical distribution of the risk.
Here is the trick: If you have a risk that could be negative or positive, split it into 2 based on the outcomes. In the case of your example, there are really 2 risks under the common category of community objection. You have the risk for a schedule delay and the opportunity for improvement ideas.
One event can have a wide variety of impacts. COVID was bad if you owned a restaurant, an airline, etc. but good if you sold vaccines or home office supplies. There is an old proverb that goes: One person's meat is another person's poison.
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1 reply by Le (Maria) Cai
Aug 23, 2024 12:15 AM
Le (Maria) Cai
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Dear Keith,
Your quantitative approach to risk analysis is both interesting and thought-provoking. It certainly brings back memories of probability exercises from my class.
I believe that your method aligns well with the concept of cumulative impact. By considering the combined effects of multiple risks, we can gain a more comprehensive (and probably more straightforward) understanding of their potential consequences.
Thank you for sharing your perspective!
Maria
Saving Changes...
Sergio Luis ConteHelping to create solutions for everyone| Worldwide based OrganizationsBuenos Aires, Argentina
After 40 years working on this matter I never was in a place where risk were categorized as negative or positive. No matter that, when I was professor in courses I teach that. In the real life I always used risk and issue clasiffication adding to that a probability of occurrence and an action to convert risk in opportunities no matter they help to avoid or mitigate them
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2 replies by Keith Novak and Le (Maria) Cai
Jun 11, 2024 7:26 PM
Keith Novak
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In my business experience, they are usually just called opportunities. In many project management and risk management courses however, they classify all uncertainties as risks, some with a positive an others with a negative outcome. It's like how they define an issue as a risk with a probability of 100% in which case it's not an uncertainty..
It does sound awkward to call an opportunity a positive risk since the origin of the word itself is danger in Italian. Maybe it's because risk management is less awkward to say than risk, issue, and opportunity management.
Aug 23, 2024 12:16 AM
Le (Maria) Cai
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Haha, thank you for sharing your experience! It’s both reassuring and interesting to learn!
After 40 years working on this matter I never was in a place where risk were categorized as negative or positive. No matter that, when I was professor in courses I teach that. In the real life I always used risk and issue clasiffication adding to that a probability of occurrence and an action to convert risk in opportunities no matter they help to avoid or mitigate them
In my business experience, they are usually just called opportunities. In many project management and risk management courses however, they classify all uncertainties as risks, some with a positive an others with a negative outcome. It's like how they define an issue as a risk with a probability of 100% in which case it's not an uncertainty..
It does sound awkward to call an opportunity a positive risk since the origin of the word itself is danger in Italian. Maybe it's because risk management is less awkward to say than risk, issue, and opportunity management. Saving Changes...
Khai Ng.IT PMO | IT Project Manager| TTGROUPHanoi, Viet Nam
Maria,
1. As the title says, Do we have to categorize risks as negative or positive?
--> Yes, beause each type of risk need a different plan to treat.
2. Is it possible that risks can be both negative and positive?
--> Each coin has two sides so the answer is Yes, but think about the main effect when you categorize risks.
3. Is my example a good way to understand it?
--> Yes, it is. But the main effect of Community Objection is the delay of the project, so it should be categorized as Negative. Even we know that it may provide an oppotunity to explore different perspectives, it is still a secondary effect. So in this case we may have a Secondary Risk, that is the result of the first risk (Community Objection), the Secondary Risk may be categorized as Positive, it will result in obtaining different perspectives that can be exploited to improve solution. Think about the major effect as uncertaint events or conditions occur when categorizing your risks.
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1 reply by Le (Maria) Cai
Aug 23, 2024 12:21 AM
Le (Maria) Cai
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Dear Khai,
Thank you for your valuable input. I appreciate your approach of categorizing effects as "main effects" and "secondary effects." It’s a very clear and intuitive way to understand the potential outcomes of risks.
Also, thank you for using this model to explain my example. It’s now much clearer to me.
Product Operations Program ManagerBarcelona, Cataluña, Spain
It comes down to semantics. When people hear the term "risk," they often think of potential loss, devaluation, or failure. The phrase "take the risk" can lead to either a positive or negative outcome. In the former case, the risk (threat) turns into an opportunity. However, calling this a "positive risk" might be a bit of a stretch.
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1 reply by Le (Maria) Cai
Aug 23, 2024 12:22 AM
Le (Maria) Cai
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*Positive risk* does sound awkward to me as well. I guess that’s why I was confused in class at first!
Program Manager, PPM&PMO Specialist.| Coppel, Mexico.Culiacán, Sinaloa, Mexico
Le María,
I prefer to think of negative risks as threats and positive risks as opportunities.
For threats, I consider anything that puts the project's objectives at risk, and for opportunities, I consider anything that supports exceeding the objectives.
I hope this helps, greetings!
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1 reply by Le (Maria) Cai
Aug 23, 2024 12:23 AM
Le (Maria) Cai
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Thank you for your input, Francisco! I appreciate your perspective of thinking about negative risks as threats and positive risks as opportunities. It’s a helpful way to visualize them.
Maria
Saving Changes...
Le (Maria) CaiMaster Student| Northeastern UniversitySunnyvale, CA, United States
Sorry for the delay, everyone. I want to thank each and every one of you for your contributions to this question. I've carefully reviewed all of your comments and appreciate your input. I'm currently working on a summary that incorporates my thoughts. Please stay tuned if you're interested in reading it. Saving Changes...
Le (Maria) CaiMaster Student| Northeastern UniversitySunnyvale, CA, United States
Jun 11, 2024 4:37 PM
Replying to Kiron Bondale
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Maria -
If we take the trouble to identify a risk, we usually do so because we expect that if realized it could impact our projects. The impact would usually be positive or negative. I suppose there is a third category which is an uncertain event which, if realized, results in NO impact to a project, but there is no value in identifying, analyzing or communicating those.
When we evaluate risks, we want to look at the cumulative impact - is that positive or negative. A risk might result in a significant negative impact but have some small positive side effects - we'd still treat that as a negative risk.
Risks can also, if realized, generate or aggravate other risks. For example, let's say we are planning to be a vendor at a tradeshow. We anticipate a maximum of 200 attendees coming to our booth over the tradeshow days. A positive risk might be having more people visit our booth that we expected as we'd assume that some percentage of those would buy our products. However, this generates or aggravates risks such as visitors being frustrated if they have to stand in line waiting to speak to one of our staff, or the risk of us running out of promotional materials.
Kiron
Dear Kiron,
Thank you for your valuable insights. I appreciate your emphasis on the importance of identifying and evaluating risks based on their *cumulative impact*.
As you rightly pointed out, risks can have both positive and negative consequences. However, it's crucial to focus on *the overall impact*, even if there are minor positive side effects.
I also find your example of a tradeshow booth particularly helpful. It demonstrates how a seemingly positive risk (increased attendance) can lead to potential negative consequences (frustrated visitors, material shortages).
Your perspective has helped me to better understand risk management. Thank you for sharing your expertise!
Maria
Saving Changes...
Le (Maria) CaiMaster Student| Northeastern UniversitySunnyvale, CA, United States
Jun 11, 2024 5:25 PM
Replying to Keith Novak
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Categorizing uncertainty as + or - is very important in many cases. When approving projects for example, a financial estimate might assume 50% of negative risks will occur and 25% of opportunities, similar to creating a PERT 3-point estimate.
A quantifiable example of how one thing could be both positive or negative is market share captured by a new product. If the product sells more than expected the project will be very profitable, and if less will result in a loss. In that case you could even have a statistical distribution of the risk.
Here is the trick: If you have a risk that could be negative or positive, split it into 2 based on the outcomes. In the case of your example, there are really 2 risks under the common category of community objection. You have the risk for a schedule delay and the opportunity for improvement ideas.
One event can have a wide variety of impacts. COVID was bad if you owned a restaurant, an airline, etc. but good if you sold vaccines or home office supplies. There is an old proverb that goes: One person's meat is another person's poison.
Dear Keith,
Your quantitative approach to risk analysis is both interesting and thought-provoking. It certainly brings back memories of probability exercises from my class.
I believe that your method aligns well with the concept of cumulative impact. By considering the combined effects of multiple risks, we can gain a more comprehensive (and probably more straightforward) understanding of their potential consequences.
Community Champion
