Unformatted text preview: ither happen in total
or not at all, e.g., whether an additional site access
road will be required.
If it happens, an extra cost associated with the risk
will be incurred in full.
If it does not happen, no cost will be incurred. Dr. Maged Ezzat Georgy Fixed Risks
The average risk allowance (contingency) for a
certain fixed risk is the EV for the risk.
EV = probability * cost (if it occurs).
The maximum risk allowance is the entire cost of the
risk. Dr. Maged Ezzat Georgy Fixed
Let us take an example...
Risk Cost Prob. Average Maximum Access road $40k 20% $8,000 $40,000 Security post $10k 35% $3,500 $10,000 Special consultant $20k 60% $12,000 $20,000 . $23,500 $70,000 . Σ
Dr. Maged Ezzat Georgy Variable Risks
These are events that may occur but the extent is
uncertain, e.g., labor productivity changes or
fluctuations of exchange rate.
Typically, a histogram / probability distribution can be
developed based on historical record...
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- Winter '14
- Ezzat Georgy, Dr. Maged Ezzat Georgy