Risks are an aspect of uncertainty. A risk is an uncertain event or condition that, if it occurs, has a positive or negative effect on one or more project objectives. Negative risks are called threats, and positive risks are called opportunities.

All projects have risks since they are unique undertakings (special or one-time efforts) with varying degrees of uncertainty.

Threat

A threat is an event or condition that, if it occurs, has a negative impact on one or more objectives Five alternative strategies may be considered for dealing with threats, as follows:

Avoid – Threat avoidance is when the project team acts to eliminate (completely remove) the threat or protect the project from its impact.

Escalate – Escalation is appropriate when the project team or the project sponsor agrees that a threat is outside the scope of the project or that the proposed response would exceed the project manager’s authority

Transfer – Transfer involves shifting ownership of a threat to a third party to manage the risk and bear the impact if the threat occurs.

Mitigate – In threat mitigation, action is taken to reduce the probability of occurrence and/or impact (chance and effect) of a threat. Early mitigation is often better than trying to fix the damage after the threat has occurred.

Accept – Threat acceptance acknowledges the existence of a threat, but no proactive action is planned. Actively accepting a risk can include developing a contingency plan that would be triggered if the event occurred; or it can include passive acceptance, which means doing nothing

Opportunity

An opportunity is an event or condition that, if it occurs, has a positive impact on one or more project objectives An example of an opportunity could be a time and materials-based subcontractor who finishes work early, resulting in lower costs and schedule savings.

Five alternative strategies may be considered for dealing with opportunities, as follows:

Exploit – A response strategy whereby the project team acts to ensure that an opportunity occurs

Escalate – As with threats, this opportunity response strategy is used when the project team or sponsor agrees that the opportunity is outside the scope of the project or that the response would exceed the project manager’s authority

Share – Opportunity sharing involves allocating ownership (giving responsibility) of an opportunity to a third party who is best able to capture the benefit of that opportunity.

Enhance – In opportunity enhancement, the team acts to increase the probability of occurrence or impact. Early enhancement is often better than improving it later.

Accept – As with threats, accepting an opportunity acknowledges its existence but no proactive action is planned (no extra effort is made to grab it).