PM6_10MAR10 - 1 Chapter Risk Management 2 Introduction to...

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Unformatted text preview: 1 Chapter Risk Management 2 Introduction to Risk Management Risk management is the practice of dealing with risk, which includes: • Planning for risk • Assessing risk issues • Developing risk handling strategies • Monitoring risk Risk management should be consistent with: overall project management, systems engineering, cost, scope, quality and schedule Risk management is often more effective and cheaper when proactive rather than reactive 3 Factors in Managing Risk Amount and quality of information about the actual hazards that cause the risk Amount and quality of information on the magnitude of the damage Length of exposure to the risk Avoidability of the risk The existence of cost-effective alternatives to accepting risk 4 Information Sources for Risk Analysis Studies of similar projects and their risks Results from tests and prototype development Data from engineering or other models Spet and expert judgments Sensitivity analysis of alternatives 5 Tools for Assessing Risk Tornado Diagram represents a sensitivity analysis of the input variables Tornado Diagrams are calculated by varying one factor at a time while holding all other input variables constant Sensitivity Chart considers changes in all input variables simultaneously We can use a random number generator to set the value of each input variable in a sensitivity chart 6 Tornado Diagram Rank by largest cost range on top Project Cost ($000’s) 7 Sensitivity Chart Rank by correlation with total project cost, largest absolute value on top Wage Rate Direct Labor Hours Material Units Needed Early Completion Bonus Material Unit Costs Interest Rates Energy Costs Overhead 8 Simple Risk Analysis Risk Exposure (RE) or Risk Impact = (probability of unexpected loss)...
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This note was uploaded on 12/20/2010 for the course IEOR E4510 taught by Professor Mosherosenwein during the Spring '10 term at Columbia.

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PM6_10MAR10 - 1 Chapter Risk Management 2 Introduction to...

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