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  • Julian Talbot

There Is No Risk That Isn't Positive

The ISO31000 definition of risk (the effect of uncertainty on objectives) includes both positive and negative outcomes. This is at odds with everyday usage of the word risk. But strictly speaking, it is a better definition than you will find in a dictionary.


Risk involves exposure to negative outcomes, yet it’s all but impossible to imagine a scenario where it does not also offer benefits, making threat and opportunity inseparable.



If, for example, you lose a month’s salary at the casino, you would probably see it as a negative outcome, but the same event is a positive for the casino. It may even become a positive for you if it serves as a lesson to prevent you gambling in future. Let us take a look at the issue through the lens of some scenarios.


Scenario 1: The Soldier


A professional soldier who works for private military companies as an intelligence officer in a variety of war zones undoubtedly takes risk and puts himself into ‘a situation involving exposure to danger’, but is that the end of the story? No.


He takes home a significant income which helps put his kids through school and college. He also uses his considerable skills to bring peace to conflict regions, and his intelligence analysis helps saves the lives of combatants and non-combatants alike. He also receives a lot of additional benefits like travel, adventure, and camaraderie among his peers.


Scenario 2: The Traveler


Another person travels overseas regularly on business, often to dangerous parts of the world. Her employer spends a lot of money putting measures in place to protect her there. Are they addressing risk? Yes, of course.


They are spending money on security to achieve a benefit. Without security measures in place, the organization could not achieve its core mission to succeed in international trade and investment. Without the risks she and her employer take, the economic benefits to the business would be much reduced.


Scenario 3: The Gambler


Ashley Revell, a 32-year-old Londoner, sold all his possessions and stood in the Plaza Hotel & Casino, Las Vegas in a rented tuxedo on Sunday April 11, 2004 surrounded by family and friends to bet everything on a single spin of a roulette wheel. He put $135,300 down on ‘red’. The ball landed on red 7 and he walked away with $270,600.


He took a risk not because he wanted to be exposed to danger, but to opportunity. The casino was also working on the same basis. Risk may not be a zero-sum game[1] but in this (unusual) case, the casino was on the negative (losing) side of the equation.


Scenario 4: Terrorism


Two hijacked aircraft fly into the World Trade Center towers. Although this was a tragic event with massive negative consequences, it brought a range of positive outcomes to some groups. Arguably, not least of all to the defense industry in the form of enormous profits, and many individuals from employment opportunities to many individuals.


Was it all positive? Not by a long shot, and arguably it was a net negative, if you could measure such things objectively.


Final Thoughts


Some of the scenarios above also include the concept that risk involves ‘a specified hazardous event occurring’, which is questionable. A risk does not have to be identified to exist. The 9/11 attack is just one of many instances where risk existed but was not specifically identified until after the event.


Including both desirable and undesirable outcomes makes our use of the word ‘risk’ slightly different from its community usage, and leaves it open to the criticism that only risk professionals use it in this way. This is a fair comment, but it overlooks two key issues:

  1. The ISO31000 standard is written for risk professionals

  2. There is no risk that does not have both positive and negative outcomes.


ISO31000 is not in the majority, but it is not alone. An increasing number of standards are adopting the concept of positive and negative consequences.


  1. “A possible occurrence which could affect (positively or negatively) the achievement of the objectives for the investment”[2]

  2. “An uncertain event or set of circumstances that should it or they occur would have an effect on achievement of one or more project objectives”[3]

  3. “An uncertain event or condition that if it occurs has a positive or negative effect on a project’s objectives”[4]



 

[1] a game in which the total of all the gains and losses is zero. Ie. For someone to ‘win’, another person must ‘lose’.

[2] Faculty of Actuaries, Institution Of Civil Engineers (2005)

[3] Association for Project Management (2006)

[4] Project Management Institute (2008)

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