When is a risk, not a risk?

Rowing with project management colleagues again. Why do all three of future, uncertain or detrimental have to be present as part of a risk? When is a risk, not a risk?

It should be obvious, if it’s not futuristic, it’s history : it’s an event. If it’s not uncertain, it’s not a risk, it’s going to happen and if it’s detrimental it’s a foreseeable cost. If its beneficial, its not a risk. Furthermore, after a long and heated conversation with some of my colleagues, only project risks should be born by the project P&L. Business risks should be born by business budgets. All this implies that risk must be financially evaluated.

The fact a film shoot might take longer than planned is an effort estimation variance, the fact that weather causes budget over-runs is a risk, the possibility that the revenue’s of the finished film may cause a loss sufficient to jeopardise the producer’s financial viability is a business risk, which project risk techniques are unlikely to militate.

It seems to me that evaluating the probability that a risk occurs and the financial cost of a risk occurring, are the key first steps to managing a risk. Otherwise, you’re left bleating in the wind that the project is too risky and neither you, nor anyone else can help. It is not sufficient to identify the risk.

I also wrote about this last month here…

ooOOOoo

Originally posted on my sun/oracle blog, republished here in Feb 2016.

1 Comments.

  1. In hindsight, some of this is the bleeding obvious, although a lot of time and effort has been put into alternative methods for evaluating risk impact, other than estimating value.