In a YouTube video of the Risk Doctor brand, Dr. Hillson explains the psychological reasons (using Maslow’s Hierarchy of needs) why there is a tendency to pay attention to negative risks before maximizing opportunities. This is important because this tendency will deter the approach of taking full advantage of opportunities. As a follower of the Risk Management philosophy of Dr. David Hillson, I decided to encourage a culture of addressing opportunities first, to promote decision makers to acquire ethos of actively using Risk Management (RM) principles from the start, without biases and deficiencies. To accomplish this, an approach of looking at RM as a holistic method can be used to achieve the objectives stated in a Project Charter or Business Case in the organization’s portfolio, which is dictated by the Board of Directors and influenced by their corporate risk appetite.
Since Project Management is filled with “uncertainties that matter” (opportunities and threats) that if they occur, will positively or negatively influence the outcome of the objectives, Dr. Hillson promotes the use of an active threats and opportunity management (ATOM) methodology with a supportive organization, competent people and using well known and “tested methods, tools, and techniques” as provided in the PMBOK® Guide to proactively manage the life cycles of the project.
For the RM process to work, it is crucial that the stakeholders understand the importance of RM, harmonized with the operational effectiveness. In a book named “A short guide to Risk Appetite” (Hillson & Murray-Webster, 2012) explain Risk Attitude, Appetite, and Thresholds as elements that upper management or high-level decision makers should “ideally” understand. This information is transferred down the hierarchy to facilitate the project team to properly manage the RM knowledge area, which, if done properly, will have a beneficial impact on cost and schedule reduction, increase in quality, and always keeping the scope objectives in mind. Risk Appetite which is a driver, and Attitude which is a choice, influence the risk thresholds in different ways. Risk appetite is multilevel, personal, project level, divisional, organizational and cultural. To culture improvement, the authors mention that it is important that every organization review its position on risk management against the two dimensions of importance and effectiveness so that adequate action be taken to move up the scale of RM maturity. It is also vital that all stakeholders understand effective RM processes, which can be accomplished by proper training and workshops.
Avoidance of a negative risk is the strategy of eliminating a thread (i.e., altering the project management plan). On the other hand, having a proactive strategy that will seek to add value (i.e., reputation, cost, time or quality) to the organization from exploiting opportunities is a fantastic idea. In his excellent 2004 book, (Effective Opportunity Management for Projects: Exploiting Positive Risk), Dr. David Hillson states that “the goal of the Exploit strategy for opportunities, is to raise the probability to 100%–in both cases the uncertainty is removed. This is the most aggressive of the response strategies, and should usually be reserved for those “golden opportunities” with high probability and the potentially high positive impact that the project or organization cannot afford to miss”. The author explains that direct and indirect approaches can be taken for optimizing opportunities.
Direct Responses Approach: To include an opportunity in the project scope or baseline, removing the uncertainty by ensuring that the potential opportunity is definitely locked into the project, rather than leaving it to chance. (i.e., buying out or ally with the competition). Indirect Responses Approach: Involves managing the project in a different way to allow the opportunity to be achieved while still meeting the project objectives, (i.e., changing a particular methodology or technology). With the goal in mind to make sure that the opportunity is not missed, in effect making it unavoidable (Hillson, 2004, p. 142).
To properly identify uncertainties that matter, it is a good idea to use a “meta language” that can be stated as: “the result of <cause>, may occur <risk>, which would lead to <effect on objective>”. To promote addressing opportunities first during the risk assessment workshop, the facilitator should encourage the creation of an Opportunity Risk Management List, prior to the Thread List creation. Another good idea is to assemble a two-sided Pre-Post Double Probability-Impact Matrix. And finally, in a Quantitative analysis using decision trees or even Monte Carlo simulations, opportunities should be studied.
References
Hillson, D. (2004). Effective Opportunity Management for Projects: Exploiting Positive Risk. New York: Marcel Dekker.
Hillson, D., & Murray-Webster, R. (2012). A Short Guide to Risk Appetite. Farham: Gower Publishing Limited.
Hillson, D., & Simon, P. (2012). Practical project risk management: the ATOM methodology. Tysons Corner, VA:: Management Concepts Press.
Project Management Institute, Inc. (2013). A guide to the project management body of knowledge (PMBOK® guide). Newtown Square, PA: Project Management Institute, Inc.
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