Risk and Opportunity: How can risk be good?

Summary

In this insightful discussion, David, the 'risk doctor,' explores the dual nature of risk management, emphasizing the importance of recognizing both threats and opportunities. He defines risk as 'uncertainty that matters' and advocates for an integrated approach that treats upside and downside risks with equal importance. David illustrates his points with a case from NASA's Constellation project, showcasing how focusing on opportunities can drive innovative solutions. He encourages project managers to extend their existing risk processes to include opportunities, ultimately fostering enhanced project performance and value creation.

Takeaways

• 😀 David, known as the 'risk doctor', began his career in risk management in the early 1980s, developing a knack for it while working for a major defense contractor.
• 🌍 The 'risk doctor' brand has been active for about 10 years, providing risk management services in over 40 countries and across various industries.
• 🤔 Risk is defined as 'uncertainty that matters', which can encompass both negative threats and positive opportunities.
• 📈 The concept of 'good risk' or upside risk highlights the importance of identifying opportunities that can enhance value rather than merely focusing on avoiding threats.
• 🔄 Both threats and opportunities should be managed through the same risk management process, which includes identification, assessment, planning, and implementation.
• 🧠 Psychological factors, such as Maslow's hierarchy of needs, often lead organizations to focus first on threats due to survival instincts before considering opportunities.
• 🔍 The integrated approach to risk management allows organizations to minimize threats while maximizing opportunities, resulting in greater efficiency and value creation.
• 🚀 An example from NASA’s Constellation project illustrates how opportunity management can lead to innovative solutions in complex project environments.
• 📚 Despite the lack of extensive literature on opportunity management, David authored 'Effective Opportunity Management for Projects' in 2004, which remains a key resource on the subject.
• 💼 Major organizations and standards, such as ISO 31000, recognize the importance of managing both positive and negative effects of uncertainty on objectives.

Q & A

What sparked David's interest in risk management?

David's interest in risk management began in the early 1980s while working for a major defense contractor when he was asked to focus on risk management, which he discovered he had a knack for.

How does David define risk?

David defines risk as 'uncertainty that matters,' emphasizing that not all uncertainties are risks, as some do not have significant impacts.

What are the two sides of risk that David discusses?

David discusses the dual nature of risk, highlighting that it can encompass both threats (negative risks) and opportunities (positive risks), reflecting a balanced perspective.

Why is it important to manage opportunities alongside threats?

Managing opportunities alongside threats is important because it allows projects to capture additional value, enhance performance, and create a more comprehensive risk management approach.

What is the process David suggests for managing both threats and opportunities?

David suggests an integrated risk management process that includes identifying, assessing, prioritizing, and developing responses for both threats and opportunities.

What psychological reason does David give for focusing on threats first?

David mentions Maslow's hierarchy of needs, where the lowest level of need relates to survival, which in project terms correlates to managing threats that could jeopardize the project.

Can you provide an example of successful opportunity management mentioned by David?

David shares his experience with NASA's Constellation project, where he facilitated an opportunity workshop that generated eight actionable ideas to help develop a moon base, showcasing the effectiveness of opportunity management.

What are David's top tips for managing opportunities?

David's top tips include extending existing threat management practices to opportunities, treating opportunities as equally important as threats, and actively seeking ways to create additional value.

Is there any literature available on opportunity management?

David notes that there is limited literature on opportunity management, but he authored a book titled 'Effective Opportunity Management for Projects' in 2004, which remains a key resource in the field.

How does David believe organizations benefit from focusing on opportunities?

David believes that organizations benefit from focusing on opportunities because it helps create additional value, improve project outcomes, and ultimately enhance the bottom line.