By this time, you should have read the first part of “Risk as a Funtion of Time.”
Let us get back to the “time component” of risk and answer a simple question made by a Transport Manager operating the Red Arrow fleet traveling from Calgary to Edmonton.
He asked, “What is the probability of snowing?”
This question casually asked, seems to be perfectly fine. A closer look however, makes it fundamentally flawed and incomplete. This is a risk question that is not properly answerable because it is without the time dimension of risk. The answer will come out without much thought and that makes the feedback less useful to a good risk manager. A risk professional knows that the answer based on personal assumptions introduces bias. It can be anything and wide ranging and nobody intelligent enough has the capacity to normalize it.
How about if we change the question to, “What is the probability of snowing within the next 2 hours from now? What is the probability of snowing within the next twelve months (Figure 1)?
Apparently, the question becomes clearer. The answer became more obvious, easier, and impeccable. The response makes more sense and is easier to formulate. It facilitates the identification of other risks and their corresponding response plans. If probability of snowing is zero, then there’s no risk. If probability is 50% and consequence is zero, then also there’s no risk. When both impact and probability is assessed to be zero, the risk is zero. Since risk points to the future, when the duration from now (future timeline) considered is zero, then there is no risk (Figure 2).
Risk is about the future. Remember that from now and the future there is a timeline. The timeline duration to the future has to have a value. Threat and Opportunity is about the future (Figure 1).
Unless time travel becomes a reality, then this conceptual principle will remain. If that happens, then perhaps, I will call it FRISKs for future risks, and PRISKs from past risks. Excuse me for deviating almost absurdly but it is fun thinking about possibilities.
Another item to remember is this: when risk (threat and/or opportunity) does happen, it is no longer risk. If the risk is a threat, we should call it an issue or a persistent problem (Frago, R. 2015.Risk-based Management in the World of Threats and Opportunities). If the risk is an opportunity, we can call it reward, benefit, advantage, solution or windfall. Although what I explained above is a lot of information to some, taking time to understand the risk concept presents a better point of view. Understanding the time component of risks will make you a better project risk manager.
Rufran C. Frago (050715) – Author
You will find a more detailed discussion about Risk in the paperback edition of the book “Risk-based Management in the World of Threats and Opportunities: A Project Controls Perspective.” It is also available in Amazon’s Kindle edition.
The book provides new/additional knowledge to project management practitioners (beginners to experts), risk management specialists, project controls people, estimators, cost managers, planners and schedulers, and for students of undergraduate courses in Risk Management. The sectional contents offer practical and common sense approach to identifying/managing risks. It is a must have for company managers, directors, supervisors, aspiring industry professionals, and even those students fresh from high school. The material is especially design to start with the foundational principles of risk gradually bringing the reader to deeper topics using a conversational style with simple terminologies.
So, if you are interested, check it out!