Risk Management is for Adults
Right off the bat, Edmund states
"I've included a new appendix (Appendix E), written by a highly respected risk management consultant and author Dr. Robert N. Charette, on the definition of risk. This appendix includes a thought-provoking discussion on differences between risk and opportunity. This discussion is particularly important and timely because many in the project management community blindly believe that opportunity should be included in the definition of risk — something that does not withstand close scrutiny."
Turning to Appendix E, we find a most interesting discussion of no less than seventeen pages. Robert Charette starts out by observing
"Traditionally, risk has been defined as the likelihood of an event occurring coupled with a negative consequence of the event occurring. In other words, a risk is a potential problem — something to be avoided if possible, or its likelihood and/or consequences reduced if not."
Later, he crystallizes this into "the potential for the realization of unwanted, negative consequences of an
event." From this definition, Edmund develops the corollary for opportunity as "the potential for the realization of wanted, positive consequences of an event." A quick look at the definition of risk in our Comparative Glossary of Project Management Terms (http://www.maxwideman.com/pmglossary/index.htm) will show that few people would disagree with these definitions.
Having recognized the difference between risk and opportunity, Robert then makes the point that
"Informally, we can say that the project [itself] represents the enterprise's attempt to realize an
'opportunity'. In other words, a project is an 'enterprise event' that has the potential for some desired positive outcome." And "A project risk, then, is always defined in relation to our project expectation."
All well and good. But then Robert asserts that "The primary purpose of risk management is to ensure that situations do not get worse (i.e. we meet our minimum expectations), instead of better." It is here that we part company. If the organization chooses to define project risk management in this limited way, so be it, but we think that the organization is then missing an opportunity for expanding the role of project risk management. That is to encompass the positive rather than dwelling entirely in the negative. We, ourselves have had several experiences where the potentially disastrous, with a little care and thought has been turned into a very profitable opportunity. Remember, we are speaking of project "uncertainty" which is the parent of both risk and opportunity and not the peer or child of risk. A point that seems to have been overlooked by both authors.
In a subsection titled "Risk Management is for Adults", Robert asserts "Moreover, the arguments that risk management will be used more because, through a definitional change [i.e. of 'risk'] project management will perceive the management of risk as more 'positive' in outlook is curious." We truly believe that this assertion is misdirected. The issue for most project managers is not whether they themselves will use project risk management but whether their organization's culture embraces it and allows them to do so. To corporate management all project management is an overhead, and if a clearly positive slant is what it takes to get project risk management accepted at that level, then why not? Indeed, many of Edmund's own examples, and comments as we note in our first quote below, suggest that this is exactly what is needed.
Of course, there is more to this discussion than we have been able to tackle in this limited space.
5. Ibid. p xvii.
6. Ibid. p435.
7. Ibid. p436, quote attributed to William Rowe in "An Anatomy of
Risk", Robert E. Kreiger Publishing Co., Malabar, FL, 1988, p24.
8. Conrow, E. H., Effective Risk Management, 2nd Edition,
9. Ibid. p437.
10. Ibid. p438.
11. Ibid. p441.
12. Ibid. p447.