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SPM/U4 Topic 3 Risk Projection

Risk projection, also called risk estimation, attempts to rate each risk in two ways—the likelihood or probability that the risk is real and the consequences of the problems associated with the risk, should it occur.

The project planner, along with other managers and technical staff, performs four risk projection activities:

(1) Establish a scale that reflects the perceived likelihood of a risk.

(2) Delineate the consequences of the risk.

(3) Estimate the impact of the risk on the project and the product.

(4) Note the overall accuracy of the risk projection so that there will be no misunderstandings.

Developing a Risk Table

Risk table provides a project manager with a simple technique for risk projection.

Steps in Setting up Risk Table

(1) Project team begins by listing all risks in the first column of the table.

Accomplished with the help of the risk item checklists.

(2) Each risk is categorized in the second column.

(e.g. PS implies a project size risk, BU implies a business risk).

(3) The probability of occurrence of each risk is entered in the next column of the table.

The probability value for each risk can be estimated by team members individually.

(4) Individual team members are polled in round-robin fashion until their assessment of risk probability begins to converge.

Assessing Risk Impact

Nature of the risk – the problems that are likely if it occurs.

e.g. a poorly defined external interface to customer hardware (a technical risk) will preclude early design and testing and will likely lead to system integration problems late in a project.

Scope of a risk – combines the severity with its overall distribution (how much of the project will be affected or how many customers are harmed?).

Timing of a risk – when and how long the impact will be felt.

Overall risk exposure, RE, determined using:

RE = P x C

P is the probability of occurrence for a risk.

C is the the cost to the project should the risk occur.

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