Risk Attitudes

I listened to Cornelius Fichtner's new PM Podcast episode today, How do risk attitudes affect your project?

As usual, Cornelius provides great content in this episode. The interview with Janice Preston was very insightful and helped me with the concept of risk management. In school, they teach you that risk management is almost like it's own little module that you do while planning and insert into the project plan. Sometimes they talk about updating and reviewing it regularly. I've never heard them talk about it in the context of the risk attitudes of project stakeholders.

You really need to listen to this episode if you haven't already, but one aspect I liked was the classification of 4 distinct risk attitudes:

1. Risk Seeker - enjoys and seeks uncertainty in search of greater opportunities, can be overly optimistic and not take possible negative consequences seriously.
   
2. Risk Averse - uncomfortable with uncertainty, doesn't like risk
   
3. Risk Tolerant - reasonably comfortable with uncertainty, but usually sticks head in the sand and ignores them
   
4. Risk Neutral - analyzes risks and weighs negative/positive possible outcomes and probabilities objectively.
   

From my experiences with project managers, it appears to me that the majority are Risk Tolerant. I say that based on how little time and effort is usually put into analyzing and planning for risks. I can also identify with these classifications because of people I've worked with on project teams. Some people seem to have their heads in the clouds and look for risky solutions when a more proven approach would do (Risk Seeker), and others are conservative to the point of seeming cynical (Risk Averse).

Risk Neutral is the goal. Personally, I'd say I'm more of a Risk Seeker right now, but the knowledge and experience I'm gaining are directing me more towards the direction of Risk Neutral. The tools and techniques of risk management are doing that for me by forcing me to look at uncertainty in more of a formal SWOT analysis where my exuberant optimism can be subjected to some logical scrutiny.

Be sure you head over to The Project Management Podcast and check out this episode.

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