Upside Risk

Risk is a neutral term.

By this, we mean that risk does not just pose threats (known as downside risk), but opportunities (known as upside risk) are just as likely to arise from an organisation’s activity.

For example, consider a software company is producing new piece of software for a customer. They could use the traditional approach by using tools that they are familiar with and deliver the product to the client in time. On the other hand they could use new tools, that they are unfamiliar with, but could complete the new software 2 months ahead of schedule receiving a bonus for completing the project early.

There is no correct answer on which route to take, in fact both result in still completing the project on time, but the opportunity of using these new software tools resulting in early completion presents an ‘upside risk’.

Upside risks remove the stereotype that all risk has the potential for things to get worse or not go as planned and gives us the opportunity to plan what to do if we get lucky or take positive risk.

Upside risk defines uncertainties that overall have a positive impact when weighed up against negative impacts. This is not to be confused with ‘upside effects’ which are the few positive outcomes from an uncertainty that is primarily a negative risk.