During project execution we are almost always confronted with Risk and Opportunities. Whether you are an architect, engineer, designer, project manager or executive leader we face risk and opportunities that change the dynamics of our project work and company. To be successfully manage risks and opportunities imagine yourself an investor, and as an investor picture the possibility of creating gains or potential loses for your project. Investors that take risk understand that greater risk may mean a greater opportunity of gains or loses.
The question becomes “How do we balance between Risk and Opportunity?”
The answers may be simple, but our decisions may be difficult to make. Risk and Opportunity have knowns and unknowns but as project team members we can use certain criteria that will allow us to perform our work diligently and with confidence. Consider the following responses when dealing with Risk and Opportunity on your projects:
Responses when dealing with Risk
- Escalate – Understand your scope of work and escalate when that risk is outside your scope of work to the appropriate project level authority.
- Avoid – As a project team act to avoid risks before they impact your project by identifying and defining them in a risk register.
- Transfer – Shift the responsibility of the risk to a third party (i.e. contractor) for them to manage the risk or to assume the impact if the risk occurs.
- Mitigate – Take action to reduce the probability of occurrence and/or impact of a risk. Early action is more effective than trying to repair the damage later.
- Accept – Acknowledge the existence of a risk. Accepting the risk can be either active or passive. An active approach of accepting risk is by establishing a contingency reserve to handle the risk if it occurs. A passive approach involves reviewing the risk periodically to ensure the risk does not change significantly.
Responses when dealing with Opportunities
- Escalate – This response is appropriate when the opportunity is outside your scope of work or the proposed response exceeds your level of project authority. It is important that ownership of an escalated opportunity is accepted by the relevant party on the project team. An escalated opportunity normally matches an objective if the opportunity were to occur (i.e. owner changes the scope of work).
- Exploit – This response may be selected when the project team wants to ensure that the opportunity is achieved. This strategy seeks to capture the benefit associated with a particular opportunity by ensuring that it happens, increasing the probability of occurrence to 100%. (i.e. owner changes the basis of design).
- Share – This involves transferring the ownership to a third party so that this third party shares the same benefit if the opportunity occurs. It is important to carefully select the new owner of a shared opportunity to ensure the entire project benefits. (i.e. joint venture)
- Enhance – This response is used to increase the probability and/or impact of an opportunity. Early enhancement action is often more effective than trying to improve the benefit after the opportunity has occurred. The probability of occurrence of an opportunity may be increased by focusing attention on its causes. Where it is not possible to increase probability, an enhancement response might increase the impact by targeting factors that drive the size of the potential benefit. (i.e. adding more resources to an activity to finish early).
- Accept – Accepting an opportunity acknowledges its existence. This strategy may be appropriate for many opportunities, and it may also be adopted where it is not possible or cost-effective to address an opportunity in any other way. Acceptance can be either active or passive. The most common active acceptance strategy is through a Change Order Request (COR) approval that defines amounts of time, money, or resources created by the opportunity-and gets client approval for their use. Passive acceptance involves no proactive action apart from periodic review of the opportunity to ensure that it does not impact scope schedule or budget.
Awareness of risk and opportunity, as well as active decision making allows our teams to be efficient, effective and profitable in the execution of work.