Here’s a question. When someone says Risk Management what happens to you?
Does your stomach start rumbling? Do your eyes glaze over and well up in tears?
We spend so much time treating thinking of risk management as a defensive, reactive process that it seems de rigeur to put the shutters up and instinctively adopt a negative mindset.
As a case in point, take a moment to ask yourself when you last had a positive, engaging or forward-looking conversation about Risk Management?
But it doesn’t need to be this way.
Rather than being defensive and reactive, what happens if we turn things around and look for positive opportunities to add more value and drive benefits? What does a positive approach to Risk Management look like?
Putting a value on opportunities
If we take the Project Management Institute position, that project risk can have “a positive…effect on one or more project objectives such as scope, schedule, cost, and quality”, then we can start thinking about “positive risk” as the opportunity cost of a forward-looking, value-add opportunity.
Imagine if we identified an opportunity to deliver the project solution 3 months early and provide an extra $5M return over the next financial year. That is a terrific opportunity and one that we would probably want to explore.
If we do NOT take up this opportunity? Well, we know that there is an opportunity cost, that a failure to deliver early will mean we forego the $5M benefit.
We change our focus, not our practice
The neat thing here is that we do not have to adjust our risk management tools and techniques. Once we have identified the opportunity, we treat it like any other risk – develop strategies, assess the likelihood and consequence, and make informed decisions about how we will respond.
Positive Risk Management is about simply changing our focus and asking ourselves different questions.
- What additional benefit have we identified?
- How will the Business gain through this opportunity?
- If we stretch to meet this opportunity, what is the impact on the team?
- What can we do to prevent this opportunity being lost?
- What does it mean to the Business if we let this opportunity slide?
We look forward, not backward
The difference is that by changing our focus and looking forward, we can see positive value opportunities and put an opportunity cost on them, rather than look backward to try to reduce negative impacts.
Our focus changes.
Negative and reactionary becomes Positive and proactive.
“If we do not have the right resources, we will not meet our deadline” becomes “if we have the right resources, we could find ways to deliver the solution early”.
“If we do not have enough budget, we cannot meet our minimum scope delivery” becomes “if we have the right funding, we could provide the best value solution”.
“Without clearly defined Requirements, we cannot deliver a quality solution” becomes “with clearly defined Requirements, we could deliver an innovative, flexible outcome”.
“Without a Quality framework, our solution will not meet a minimum standard” becomes “with a strong Quality framework, we could surpass performance standards and reduce operational support costs”.
4 Simple Steps
We can break down a positive risk management approach to four simple, repeatable steps.
- Risk Identification – do you have a process in place to actively seek and identify positive risk opportunities?
- Risk Exploitation – have you planned actions that will reduce or remove the uncertainty of the opportunity being missed?
- Risk Sharing – are you able to assign ownership (in part or whole) of the risk to a third party who is in a better position to make sure the opportunity is realized?
- Risk Enhancing – can you monitor and focus on risk triggers and root causes that increase the likelihood of opportunity realization? An example might be adding specialist resources to the team to increase the probability of finishing early.
So, what can YOU do next?
Think about your own practice for a moment. Can you adopt a positive risk management approach?
Ask yourself whether your risk management plan includes the four step approach.
Look at your customer’s timeline for realizing benefits. If you could get the product to market 3 months ahead of plan, what would that mean to your customer? Would the customer respond well to a soft launch/prototype which rolls the solution out to market early?
Think about your team’s resource profile. If you could embed the customer’s resources in your team, could you reduce the cost of the overall team? Would building ownership within the customer resources allow you to run a shorter, smoother product handover?
What about the customer’s product delivery strategy? If you consulted with the Marketing team and aligned your delivery with their wider strategy, could the customer benefit through rolling out more products, sooner?
Have you got the best skills on board? If you had access to the very BEST people and skills, could you provide even more product flexibility and innovation? how would that improve the customer’s value proposition?
Ask yourself whether you have the right mix of skills on board.
- Are you partnering with the right vendors?
- Can you consult more broadly?
- Can you cross-skill amongst your team?
The challenge is not to fundamentally change our risk management practice but to approach that practice from a different angle.
To think differently.
To ask new questions.
To challenge our old approach.
To see what value we can bring by looking ahead, rather than behind.
Disclaimer: I originally wrote both this post and the accompanying Slideshare presentation in February 2014. I have polished this post to remove some rough edges, but the Slideshare preso remains unchanged.
I’ve attached a few thoughts to help you get yourself into a positive risk management mindset. Do reach out if you want to discuss this further!