Mar15An uncertainty that mattersPosted at 22:12 in Project Management, Risk Management

It has been a long time since I wanted to talk a bit more about risk. Risk Management is one of my preferred knowledge areas in the Project Management Body of Knowledge, but the sad thing is that it is often misused. It starts with the definition of a risk. In the common language, a risk has always a negative connotation: it refers to the possibility of misfortune or loss; to hazard; to something exposing to danger; perilous. To be honest, most people just keep looking at that single side of the coin. If you want to implement an integrated risk management process, you will have to consider that risk isn't always just a bad thing.

The PMI defines risk as an uncertain event or condition that, if it occurs, has a positive or negative effect on an objective. Dr. David Hillson has a much simpler definition of a risk: an uncertainty that matters. I love this sentence. It clearly outlines the two dimensions of a risk: the uncertainty (or probability); and the effect on objectives (or impact). That makes things easier to understand: if you can predict 100% of chances for something to happen, then it is not a risk. Nor is it a risk if it is uncertain, but has no impact at all on the project or its deliverables.

That being clarified, the PMBOK defines Risk Management as the systematic process of identifying, analyzing and responding to risk. There is a suitable set of processes in the framework to deal with risks, that works for both threats and opportunities. These processes naturally follow the phases of a project, but really need to be taken seriously. Underestimate them and chances are high that you will end up pulling the plug.

Coming next: The Risk Management Plan

All content (443 posts since 25/06/04) published on this weblog is © Frédéric Casagrande, unless stated otherwise and published under Creative Commons licence. This weblog is hosted by Sixapart.

This weblog uses third-party advertising companies to serve ads when you visit it. These companies may use information (not including your name, address, email address, or telephone number) about your visits to this and other websites in order to provide advertisements about goods and services of interest to you. If you would like more information about this practice and to know your choices about not having this information used by these companies, click here.