Amacom - Modern Project Management (Ocr) - 2001 ! - (By Laxxuss)

# Te team fly am fl y page 231 chapter 9 risk

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Unformatted text preview: on to the different variances that have been defined, there are other performance measures that can be divided into performance indices and status measures. The performance indices, like the variances, are usually computed only at the total project level. The first two, the cost performance index and the schedule performance index, correspond to the cost performance ratio and the schedule performance ratio with which we are already familiar. All of these performance indices are considered to be good if they are greater than one and bad if they are less than one. Page 230 Cost Performance Index: CPI = BCWP/ACWP Schedule Performance Index: SPI = BCWP/BCWS To Complete Performance: [BAC -BCWP]/[EAC-ACWP] The TCPI represents the ratio of the "work remaining" to the "cost remaining" to complete the project, which is the productivity ratio projected to complete the project. The status measures are the percent complete, with which we are already familiar, and the "Percent Spent." They are also usually computed only for the total project. They are defined as follows: Percent Complete: PC = BCWP/BAC Percent Spent: PW = ACWP/BAC The Percent Spent is sometimes calculated using the alternate formula: PS = ACWP/EAC. Finally, there is the EAC, which has already been discussed; there are two ways of calculating EAC, referred to as the CPI method and the composite method. They are defined as follows: EACCPI = BAC/CPI EACCOMPOSITE = ACWP + [BAC –BCWP]/[CPI * SPI] We have already discussed the EAC as computed via the CPI method. The second method involves adding what has already been spent to a computation of what may be spent if the present trends, as measured by the CPI and the SPI, continue. TE Team-Fly® AM FL Y Page 231 Chapter 9— Risk Management As we saw in Chapter 2, before the work content of a project can be managed, it must be quantified, and before the cost of a project can be estimated, not only the work but the materials, equipment, consumables, and so on must also be quantified. Since risk, as we use the term, relates to completing the project on time and within the allocated budget, it should come as no surprise that the fundamental principles that underlie risk management are closely related to the fundamental principles of project management. Consequently, the principle that work that cannot be quantified cannot be managed transforms into the principle that risk that cannot be quantified cannot be managed. As we shall see in this chapter, the method we advocate for risk management is very much like the method we advocate for project management. A fortunate by-product of this relationship is that the same tools developed for project management can be used for risk management. 9.1— Quantification of Risk The quantification of risk must be based on an assessement of risk in a similar manner in which the quantification of work is based on a project design or a project definition. In Chapter 2 we did not discuss how to design a product whose production Page 232 might be the end result of a project, nor did we discuss how to specify a project definition for an in...
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## This note was uploaded on 01/11/2011 for the course ACC 9 taught by Professor Yeetan during the Spring '10 term at Sunway University College.

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