Everyday Operational Definitions of Risk & Opportunity Terminology

[Jim Whiting]

A number of "standard" definitions and uses of risk and opportunity terminology can confuse even experienced R&O professionals.

The attached PPTX of Definitions are recommendations to hopefully  clarify some of that confusion.

The rationale for these recommendations is based on the premise that there is no need for the concept of a "positive Risk".

A scenario identified as leading to a positive / wanted but / uncertain outcome is best considered as a pursuit  of an Opportunity

not managing a " positive Risk".

What do you think?

Everyday Risk & Opportunity Definitions.pptx

[Susan Jaques]

HI Jim

The document is colourful!  

Can you give an example of when an engineer would contemplate using the concept of "positive Risk" (I've never heard that term!).

In the effort to clarify risk, we should put some context around it.  How might this document help an engineer deal with risk for a detail design? Or an operating asset? Or for what task might it help?

Susan 

[James Whiting]

Hi Susan

Sorry for missing your response months ago. Thanks for the responses.

 

Hi Susan Thanks for your responses and sorry for a belated reply

YOUR QUESTIONS

1. Can you give an example of when an engineer would contemplate using the concept of "positive Risk" (I've never heard that term!).

MY RESPONSE

Out the outset, I do not recommend ever using the term “positive risk”.

Risk engineers like other professional are often focussed on managing the chances of a negative outcome to a proposed activity. Instead we should never lose sight of the positive outcome which is always the real “raison d'être” for any activity.

In some instances Project Managers view the chances of coming in overbudget or experiencing schedule slippage as “negative risks” where all they  need to say is “risks” because a “risk “should always be related to a negative outcome only.

Viewing the chances of the coming in underbudget or ahead of schedule has been described as a “positive risk” where all they need to call either is an “opportunity”.

My strong recommendation is to reserve the  use of the term “risk” only when a decision re experiencing a possible negative outcome is being discussed.

In contrast “opportunity” should always be used in discussion of achieving a positive outcome.

The problem is created by equating “risk” with “probability” and using it regardless of the whether the considered outcome is positive or negative.

2. In the effort to clarify risk, we should put some context around it. 

AGREE strongly

3. How might this document help an engineer deal with risk for a detail design?

The engineer dealing with risks associated with a design process would need to focus on how to achieve the positive outcome of a “fit-for-purpose” result of the design [ to borrow a term commonly used in Quality Management ]

4. Or an operating asset?

[ ditto above the designer needs to focus on the positive objective of achieving a design of an asset that will achieve its intended functions reliably, consistently, efficiently and safely]

5. Or for what task might it help?

As described above, any task that is intended to maximise the chances of a positive outcome - a “double positive”

NOT just the “double negative” – minimising the chances of a negative outcome.

 

By the way, there are similar arguments for not using the common terms “pure risk” and “speculative risk” which also uses the term “risk” for positive as well as negative outcomes or consequences. Speculation is a process which involves possible positive and negative outcomes i.e. “opportunity” and “risk”

Prospect            -  source of a possible but uncertain positive outcome

Hazard                - source of a possible but uncertain negative outcome

             

Opportunity - a set of circumstances allowing pursuit of a positive but uncertain Prospect

Risk                - a set of circumstances allowing exposure to a negative but uncertain Hazard