Riders #5 and #6 of the Magnificent Seven

Strains of the Marlboro Suite (theme from the 1960 The Magnificent Seven western movie) still linger in my mind as we look at two more risk response strategies today.  Remember, risk is uncertainty, and it may be positive for our projects in the form of opportunities, not just threats or negative uncertainties.  So when faced with opportunities in our projects, how can we better position the project to capitalize on or take advantage of these opportunities?

Two more strategies, in addition to Risk Sharing, for responding to positive risks are:

1. Risk Enhancement, and
2. Risk Exploitation.

Risk Enhancement

Remember Risk Mitigation?  Reducing the probability and/or impact of a threat?  Right…  Well, consider Risk Enhancement as the opposite of mitigation – increasing the probability and /or impact of an opportunity.
For example, consider a large awards show, like the Grammy Awards that were just presented this week.  There was a huge opportunity for the limousine industry in transporting all of those stars to the event to pose for the fashion photographers on the way in!  Limousine companies no doubt enhanced the opportunity to increase profits by ensuring that every driver and limousine possible was available that evening!  A similar strategy would be airlines’ having more flights in the schedule during peak holiday travel periods.

Several project tactics might be applied to follow this same strategy.  To achieve “bonus milestones” for early completion, you might assign more skilled team members to the critical activities to increase the probability of achieving such bonuses or other opportunities realted to your project.

Risk Exploitation

I view exploiting an opportunity as the opposite of avoiding a threat.  Both strategies drive the probability of the risk event’s occurring to the extreme.  Avoiding a threat drives the probability to 0%.  Exploiting an opportunity means driving the probability of it’s occurring to 100% – ensuring that the opportunity will come to fruition for the project.

For example, suppose project cost is a great concern to your sponsor and he has offerred a bonus to come in at or under budget.  The uncertainty of project costs may be high, but you can exploit opportunities to make the cost a known.  To exploit the bonus, you could outsource the majority of the project work at fixed prices, ensuring that you can bring the project in on budget.

The key to this response strategy is to ensure that the opportunity will happen for your project.

So far in our posts, we have reviewed six of the Magnificent Seven:

1. Risk Avoidance,
2. Risk Mitigation,
3. Risk Transference,
4. Risk Sharing,
5. Risk Enhancement, and
6. Risk Exploitation.

In my next and final post in this series, I want to focus on the default risk response – the strategy we choose by not choosing another!  As you prepare for the PMP® Exam, do not overlook this ghost rider of the Magnificent Seven – sometimes it provides the best strategy of all seven!