Transcript

While risk is usually described in the negative as a downside or a threat, risk could also be described in the positive as an upside or opportunity.

Risks are uncertainties which, if they occur, could affect the achievement of your objectives either negatively as threats, or positively as opportunities.

Negative uncertainties could include the possibility that your planned performance targets might not be met, interest or exchange rates might fluctuate, or your client’s expectations may not be met.

Positive uncertainties could include being early for a project milestone, exceeding your budget, or exceeding your performance targets. These are uncertainties that could positively affect the achievement of your objectives.

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“Is the glass half empty or half full?” is a common expression that is generally used to indicate that a situation could be a cause for pessimism (half empty) or optimism (half full). It is a general litmus test to simply determine your worldview.

The optimist sees the glass as half full – focusing more on what is there and all that could be done with half a glass of water.

The pessimist, on the other hand, sees the glass as half empty – focusing more on half the water being gone and, eventually, the glass becoming empty.

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According to Sir Winston Churchill, “an optimist sees the opportunity in every difficulty, a pessimist sees the difficulty in every opportunity”,

If you are a project manager, there is a downside risk or threat that the project may be delayed. On the flip side, there is an upside risk or opportunity to complete the project before the deadline.

Both uncertainties could affect the achievement of your objective, which is to complete the project on time.

Reframing an uncertainty as an opportunity can go a long way in getting things done differently rather than constantly thinking about uncertainties as a threat.

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Effective management of uncertainties, risks and opportunities requires a proactive approach that seeks to reduce the size and possibility of threats or increase the size and possibility of opportunities.

Opportunities and threats are seldom independent. Just as it is not advisable to pursue opportunities without regard for the associated threats, so it is rarely advisable to concentrate on reducing threats without considering associated opportunities.

Effective risk management, therefore, requires you to identify the “uncertainties which if they occur will have a positive or negative effect on one or more objectives”.

A point to note is that you are not managing the event itself but managing the consequence of the event.

Linking risks with objectives and the achievement of your success will ensure that your risk management activities focuses on those uncertainties that matter, both positively as opportunities and negatively as threats, rather than being distracted and diverted by irrelevant uncertainties.

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