Risk and Opportunity: How can risk be good?

In this PM Channel interview, David Hillson (The Risk Doctor) discusses with Dr Andrew Delo what is meant by positive risk, and explains how an integrated risk process can address both threats and opportunities.

[@aliciali7980]

I'm preparing for an application to a risk management position at a bank. I found this video very inspiring. Thank you a lot!

[@Risk-Doctor]

Thanks Alicia, I'm really glad to hear that this video was useful to you. I wish you success in your job application. Let me know if we can help further.

[@hrishikeshkandalgaonkar5883]

why are you soo good David? You have set me on the path of becoming the Risk Doctor 2.0

[@Risk-Doctor]

Thanks for your positive encouragement Hrishikesh. The world has room for more than one Risk Doctor! Go for it!!

[@kashthkkr87]

Wow, this gives a complete perspective to the term Risk Management. Where there is a risk, there is indeed an opportunity so why not think about maximizing the opportunity along with minimizing the negative uncertainties.

[@Risk-Doctor]

Exactly right, thanks Kashyap.

[@pradeepbhatnagar4848]

Vry. Inspiring nd outstanding Lecture on Risk Management.

[@Risk-Doctor]

Thanks Pradeep, I'm glad you liked this one.

[@motediwamachelle8732]

I enrolled with Harvard University for risk management last year, it was a free course but i did not receive my certificate so sad seriously but am still interested on it. Thank you doctor

[@Risk-Doctor]

I'm sory you didn't get your certificate from Harvard, but at least you still have the knowledge and understanding that you gained by attending!

[@lutfiyabasheer6782]

Thanks Sir, really my classmates are surprise because of my ideas of risk management , I advised them to watch your videos to develop their knowledge for Risk Management. Thanks

[@Risk-Doctor]

Thank you Hala. I am glad that you are finding my videos useful for yourself, and I am grateful that you are recommending them to your colleagues. I wish you success in your studies.

[@titipsy]

Good idea to insist in this video on opportunities. It can help people to appreciate the interest of risk management from a positive point of view.

[@Risk-Doctor]

Thanks - I think it is essential to include opportunity in our thinking about risk as well as in our risk processes. If we don't, then we are missing half of the benefits of managing risk.

[@masterprattu]

Great videos! Your way of explanation is incredibly articulate!

[@Risk-Doctor]

Thank you for this positive and encouraging feedback.

[@GP-qb9hi]

This seems like a risky answer at a risk-management job interview at a bank.

[@Risk-Doctor]

Ha ha! But it depends whether the job is to manage client risks on behalf of the bank, or if it's to advise the bank's management and leadership on risks to the bank as a business.

[@sraajput]

Sir you are awesome

[@Risk-Doctor]

Thanks for your encouragement Sahil, much appreciated.

[@deanweis]

I would love to hear a very simple example this

[@Risk-Doctor]

How about these: Because we have to outsource production, we may be able to learn new practices from our selected partner, which would lead to increased productivity and profitability. The project is planned to take place during the summer, so we may be able to recruit additional skilled student labour, which would save time on all activities that take place over that period. Because there are three other projects taking place in the same time frame, we may be able to utilise skilled staff as they become available from another project, which would allow us to deliver early to the customer. Does this help??

[@chetanasin9150]

Thanks

[@Risk-Doctor]

No problem

[@motediwamachelle8732]

Good morning Doctor, look i have a project of writing books and at some point i find myself in a situation where i must market my work, so how can i do that so that i can reach more customers, may be strategies i can apply.

[@Risk-Doctor]

You can easily apply the basic risk procss to the objective of maximising the number of people who you reach to tell about your new book. 1. Clarify objective. 2. Identify threats and opportunities. 3. Proritise to find worst threats and best opportunities. 4. Develop and implement proactive responses. 5. Monitorresponse effectiveness. 6. Review and repeat.

[@Genarin1004]

Con todo respeto, ayudaría mucho que se pueda traducir al español, sobre todo a las personas que todavía no dominan el inglés, pero que desean aprender sobre este tema tan importante. Otros profesionales permiten la traducción del vídeo a través de botón Settings. Muchas gracias

[@Risk-Doctor]

Genaro Del Carpio Hi Genaro - please allow me to reply in English?! Unfortunately our videos are only available in English, and it would be a lot of additional effort to prepare subtitles in Spanish or other languages, so this is not in our current plans.However you might like to know that all our Risk Doctor Briefings are available in Spanish, as well as other languages. You can download briefings for free from the Risk Doctor website here: risk-doctor.com/rdp/briefings. You can also sign up from the website to receive RD Briefings as soon as they are published - just go to risk-doctor.com/rdp/briefings/request_translation. I hope this is helpful.

[@nenadsusic8276]

"Opportunities" that offset project ailments aren't really opportunities but recovery actions. Opportunities should lead to a favourable overall outcome unless I am missing something?

[@Risk-Doctor]

Hi Nenad, thanks for your comment. You're not quite right on the definition of opportunities. An opportunity is a positive risk, or an upside risk. That means that it is an uncertainty (it may never happen), but if it does happen it has a positive effect on an objective (saves time, reduces cost, improves benefits etc.). This is not the same as an action that we could choose to take in order to recover from the impact of a threat. I hope this clarifies things for you.

[@nenadsusic8276]

I've been somewhat conflicted about this concept because it gets misused in the same way the term "risk" does i.e. risk = bad and leads to phrases like "We need to manage our risks and pursue opportunities". Philosophical, I agree. However, and as you point out, a concrete action may lead to a positive effect on an objective and that is an opportunity - no disagreement. Having said that, in my travels I have witnessed actions that are aimed at reducing threats being referred to as "opportunities" simply because avoiding downside is seen as positive instead as a minimum expectation. Similarly, benefits were the same - "We need to lodge a form to get an exemption." There is no uncertainty. Perhaps that was the crux of my comment. I've also seen first hand, and this is a slightly different but related point, how different parts of the business identify opportunities and capture them but the business as a whole suffers - and you refer to that quite elegantly with the ying-yang analogy. This is not a risk management issue but a KPI one. So that got me thinking about the interdependence of opportunities and threats. In that instance, if we have an objective i.e. to finish the project within the allotted budget, then threats and opportunities that link to that objective are not two standalone items (though risk registers treat them as such). Instead, not meeting project budget is a scenario that rests on a continuum of uncertainty ranging from under spend to overspend. For example, the evaluation rationale may be something along the lines of "Estimated 30% overspend if controls not adhered to but opportunity to reduce spend by 15% if a control A is optimised". So a procurement function could have certain processes in place to stop the project from overpaying for a service - BUT - if they tender internationally, they could get a much better deal. However, international supplier could mean project delays which could introduce other costs, economic and non-economic alike. So in absolute terms, yes an opportunity is an upside risk but if not checked for upstream/downstream implications, then it could be little more than brass.

[@Risk-Doctor]

Thanks for explaining your thinking on this important subject a bit further Nenad. you might be interested in this short video on the relationship between threats and opportunities: kzbin.info/www/bejne/e6DVq6FmjK6lrsk. You're right that we need to be careful about how we use language about risk, but also we need to be careful about how we think about risk!

[@svenbadstieber3001]

Very nice but a bit repetetive for shooo

[@Risk-Doctor]

Thanks Sven, that's an interesting response. It's often helpful to use repetition to reinforce a new concept, as people may not get it the first time. But repeating the same thing too many times can be counterproductive and boring. The trick is to say the same thing in different ways! Perhaps we didn't get the balance quite right for you this time, sorry. But I hope you got the point!!