Prioritize opportunities using red/yellow/green
Tuesday, July 11, 2017
A client recently said they were not happy using the standard red/yellow/green color scheme in the Probability-Impact (P-I) Matrix for risk prioritization, because it was "designed for threats." For organizations who want to use an integrated risk process to manage opportunities alongside threats, this is a common perception — but it is wrong.
First, let's think about how we prioritize threats.
The worst threats have a high chance of happening and a major negative impact, so we rate them high priority in the red zone of P-I Matrix to ensure that they get maximum visibility and attention. Threats with a low chance of occurring and potentially only a small impact are lowest priority, so we rate them green. Intermediate threats are rated yellow to indicate that they are medium priority, neither red nor green.
So red means bad, green means good and yellow means something in between.
Obviously, we can't use this scheme to prioritize opportunities. The highest-priority opportunities are really good, with high probability (likely to happen) and high impact (if they occur, they bring major benefits). If we used the standard red/yellow/green color system, the best opportunities would appear in the red zone, which can't be correct, because "red means bad."
Wrong! The key mistake is to think that "red means bad" and "green means good." In fact, these colors are culturally determined. In most of Asia, red means lucky or good. But in the risk process, the red/yellow/green color scheme is based on a traffic light:
- Red means "stop." If you get a really bad threat or a really good opportunity, you need to stop going in the current direction, consider the risk and maybe move off in a new direction.
- Green means "go." If the threat or opportunity is insignificant, then you can continue going in the same direction without stopping.
- Yellow means "take care." Be ready to stop or go if the traffic lights change. Risks in the middle zone need to be monitored to ensure that we are ready to do something different if the priority level of a threat or opportunity changes.
This means it is quite correct to use red/yellow/green to prioritize opportunities in the same way as we do for threats. This is reflected in the typical P-I Matrix shown below, using red/yellow/green for both threats and opportunities. (This has the opportunity side rotated to bring the two red zones together into the middle, creating a central high-priority area containing threats and opportunities that require urgent attention.)
Despite the underlying traffic light model, some people are still not happy with red/yellow/green for opportunities, and they may choose to use gold/silver/bronze or different shades of blue. But there are good reasons to stick with red/yellow/green — because of the link with traffic lights, but also to emphasize that we can prioritize both threats and opportunities using a common approach.
We should always remember that a threat is the same as an opportunity; the only difference is the sign of the impact. And when we are prioritizing risks, we need to decide when we must stop, when we need to take care, and when it is safe to continue to go ahead.
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