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About this lesson
Understand the difference between positive and negative risk. Learn the major steps of project risk management.
Download this lesson’s related exercise files.Positive and Negative Risk.docx
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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.
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.
- When setting project boundaries, identify those boundaries that are most sensitive to risk.
- During project planning, and again at the start of each phase, conduct a team meeting to identify project risk – both positive and negative.
- Analyze the risks to determine which ones require a response.
- Prepare the risk response plans.
- 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 the one into the other. For instance, if a negative risk is project personnel availability may be delayed, a positive risk is 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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PMI, PMP and PMBOK are registered marks of the Project Management Institute, Inc.