When is a risk, not a risk?
By DaveLevy on May 02, 2005
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 its not futuristic, its history : its an event. If its not uncertain, its not a risk, its going to happen and if its detrimental its a fore-seeable 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.
My previous thoughts are here....