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STR N421 - Lecture 2 - 2011

# Drmagedezzatgeorgy how how to measure a project risk

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Unformatted text preview: ll if any of them worth your attention more than the other risks. Dr. Maged Ezzat Georgy How How to Measure a Project Risk Any project risk is defined/measured through its “magnitude”. The risk magnitude is depicted via: ◦ The probability of occurrence of this risk. The ◦ The impact it would have, in measurable terms, if it happens. Dr. Maged Ezzat Georgy Probability Probability is simply the likelihood that a risk event will will occur. Let’s say you’re planning the concrete pouring next Thursday. Dr. Maged Ezzat Georgy Probability Probability Let us further assume that the weather forecasters say Thursday has a 20 percent chance of rain. Therefore, the probability it will rain while concrete pouring is 20 percent. Dr. Maged Ezzat Georgy Impact Risk impact is the consequences of the risk event on you, if it actually happens. In the rain case described before, this event can result in: ◦ One day of delay, and ◦ \$1000 of unused resources on Thursday. Dr. Maged Ezzat Georgy Information and the Project Life Cycle Life As you progress in the project, the information Initiation I N F O R M A T I O N available to you increases. Close-out As the information increases, your ability to identify and measure the risk improves. Dr. Maged Ezzat Georgy Information and the Project Life Cycle Life With little information at the project start, the risk magnitude is described in approximate, subjective and qualitative terms. For example, we can say: ◦ Probability is “moderate”. ◦ Impact is “significant”. ◦ The risk has “little” magnitude. Dr. Maged Ezzat Georgy Information and the Project Life Cycle Life At the later stages, and as the information increases, the risk magnitude is described through a more objective and quantitative terms. For example, we can say: ◦ Probability is 35%. ◦ Impact on cost is \$24,000. Dr. Maged Ezzat Georgy PMI’ PMI’s Practical Risk Management Approach Mana Risk management is primarily about “creating and implementing a risk plan”...
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