Uncertainty

What is special about project risk?

Where do project risks come from?

·      Risk stems from "Uncertainty"

·         But Uncertainty may give rise to either positive or negative events

·         i.e. beneficial or adverse

·      Uncertainty may be defined as

·         All events whose probabilities are neither close to 0%, nor to 100%

·         The typical project environment!

The Uncertainty Spectrum

Project Risk Management Purpose

Any project risk management effort should:

·         Not only focus on avoiding the downsides

·         But actively pursue the upsides

·         Perhaps we can emphasize this by the diagrams on the next page

·         And clearly identify

·         Who should take responsibility for each identified risk event

The Nature of Uncertainty

Opportunity

(Favorable)

Opportunity

Not just risk, but opportunity, too!

The strategy of project risk management must be to move uncertainty away from risk and towards opportunity

So how do you deal with project risk?

·      As we describe in Issacon #1106, you cannot 'manage' risk itself

·         You can only 'respond to events'

·         But you can plan your responses

·      Response to project risks may take many forms. First of all, you can simply

·         Ignore any risk events

·         I.e. leave them unrecognized or unmanaged by default

Being pro-active is better

You can

·         Recognize a risk event but take no action

·         If it appears to be of little consequence

·         Retain it and absorb it

·         By prudent allowances

·         Reduce it

·         By some appropriate steps

·         Avoid it

·         By taking some alternative approach

You can also involve others

If amenable, you can

·         Transfer a risk to others

·         By contract or agreement

·         E.g. by insurance, if insurable

·         Share it with others

·         E.g. by joint venture

·         Combine several approaches

·         By including any of the above