Do we have to categorize the risks as negative or positive?

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.

Maria

I want to thank everyone who has joined the conversation. Your insights have been invaluable, and I’ve learned a great deal from all of you (and likely those who are reading this discussion as well).

Here’s my summary of the key takeaways from our conversation on risk evaluation:

The term “positive risk” can be somewhat awkward. In a professional setting, “opportunity” might be a more commonly used term.

Hello Maria
This is an interesting question. Please let me share my views on this. Starting with the basics.
1. Risk refer to the uncertainty in an outcome. For example, it normally takes 7 days (expected outcome) for a shipment to arrive from Japan to UK, but we have seen a variation of plus/minus 1 day in this schedule in the past. This variation is the risk associated with this delivery. I am not going into statistics to keep things simple.

2. Plus 1 day in delivery is a “negative risk”, and Minus 1 day in delivery will be a “positive risk”. So, as per my understanding, we should have two records for this risk in our plan: One as positive and one as negative. As this risk is a minor one, probably the strategy would be to “accept” for both cases. Just monitor with no special action needed.

Now, coming to your specific questions.

1, As the title says, Do we have to categorize risks as negative or positive?
Yes, any risk has to be categorized either as positive or negative. Risk is the uncertainty and it will go one way or the other.

2. Is it possible that risks can be both negative and positive?
Yes, I have given an example above.

3. Is my example a good way to understand it?
Not sure about this. Let’s say you plan to complete the project is 100 days. Due to community objections, the project can potentially delay by 10 days. Then, we have a negative risk here. Now, you engage the community stakeholder, and as a part of risk response, you decide to change the project objectives while extending the schedule of the project to 110 days. I will not call it a positive risk. The negative risk materialized and as a result your project baseline schedule is delayed by 10 days. Project team “accepted” the risk.

4. If my example isn't a good example, but you agree with point 2, would you provide another proper example?
I have already given an example above.

I hope this helps. Thank you for sharing this interesting question.
Regards
Sachin

I'm a certified PMI Risk Management Professional (PMI-RMP), and I would like to share my understanding of risk in project management drawn from my previous presentation.

Categorizing risk as positive or negative is crucial for identifying opportunities and threats. Positive risks (or opportunities) can enhance project outcomes, while negative risks (or threats) require effective mitigation strategies. This distinction enables teams to prioritize their focus and resources, ultimately leading to more successful project results.

It’s important to note that risks can have both positive and negative aspects simultaneously. For example, heavy rain during a concert might negatively impact the performance and attendance, yet nearby merchandise vendors could benefit from increased umbrella sales.

Here are some common Risk Response Strategies in Project Management for your reference.

Negative Risks:

a) Mitigate : 
Implementing additional training for staff to reduce the chance of errors in a project.

b) Transfer:
Purchasing insurance to cover potential losses from project delays.

c) Avoid:
Changing the project schedule to avoid a known conflict with a major holiday.

Positive Risks:

a) Exploit: 
Allocating extra resources to a high-potential initiative that could lead to early project completion.

b) Share:
Partnering with another company to co-develop a feature that could enhance the project’s marketability.

c) Enhance:
Investing in improved technology that could boost productivity and reduce overall project costs.

Both Negative and Positive Risks:

a) Accept: 
Acknowledging that a potential market shift could affect the project but deciding to proceed as planned while monitoring the situation.

b) Escalate:
Informing senior management about a new regulatory requirement that could impact the project timeline, seeking their guidance on the best course of action.

There are also other related terms in Project Risk Management that should not be confused, such as Inherent Risk, Residual Risk, Secondary Risk, etc ...