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Address Risk at the Start of Your Project

You can measure opportunity with the same yardstick that measures the risk involved. They go together. – Earl Nightingale. 

PRINCE2® defines risk as an uncertain event or set of events that, should it occur, would have an effect on the achievement of objectives. So, PRINCE2®  sees risk as having a positive (to take profit) and negative (option to loss) efect. Normally, positive risks are referred as opportunities and negative risks as threats.

® has the same point of view and states that project risk management objetives are to increase the probability and impact of positive events and decrease the probability of negative events in the project.

Risk Types

There are mainly two types of risks:

  • Business Risks: concerning those normal risk of doing business that can result in either gain or loss.
  • Pure, or insurable risks:  concerning those risks if they materialise can only result in loss. 
If you can take out insurance against a risk then you need not actively manage it. Insurance is a type of risk transfer, which leaves you to focus your efforts on the business risks.

Risk Factors

Risk is mainly charanterised by three factors:
  • Risk event: what might happen to the benefit or detriment of the project.
  • Risk probability: the likelihood of occurrence of the event.
  • Amount at stake: the extent of loss or gain that could result.
So, the Exposure is equal to the Risk probability multiplied by the Amount of stake.

Risk in the Project Lifecycle

Based on all the earlier information, we can conclude that the time to address risk is at the start of the project. This is the point when the number of unknowns (risks) is greatest but the amount at stake (money invested) is the lowest.

Finally, we would like to mention this quote about dealing with uncertainty: 

As we know, there are known knowns; there are things we know we know. We also know there are known unknowns; that is to say we know there are some things we do not know. But there area also unknown unknowns; the ones we don’t know we don’t know. And if one looks through te history of this country and other free countries, this is the latter category that tends to be the dificult ones. -Donald Rumsfeld (about Iraq’s weapons of mass destruction)

What is your best advice to deal with uncertainty?

Author: angelberniz (All Rights Reserved by the author).
Source: Original text (based upon first hand knowledge).
Image courtesy of jscreationzs at
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