PROBABILITY & IMPACT: KEY COMPONENTS OF RISK

Once tasks on a project that have uncertainty are identified, a risk statement can be developed.  Key considerations or components of risk, are the risk event itself, the impact that the risk has on the project and the probability that the risk event will occur.

Potential for problems and opportunities may exist in each task or line in the WBS. Through a line by line examination, we can identify problems in scope or task requirement, duration or timeline, and resource risk.

Probability

……    a perversity of risk

 “ 2 guys jump out of  an airplane – one with and  one without a parachute.  Perversely, the guy with the parachute has more risk.  We know what will happen to the guy without the parachute!”

What is the probability that an event will occur?  The higher the probability, the greater the importance of this risk (up until of course we reach certainty).  If it was always certain that an event would happen, it would be in the project plan and/or other project documents such as the contract.

We really want to consider those threats and opportunities that are likely to happen.  Rank on a scale of 0 to 100:
What is the impact of the risk?  The more significant the impact, the more attention should be paid to it.  If the cost or impact of a risk occurring is $50, should you be spending company time and resources on it?  No, of course not! If the impact is a 10 minute delay, should you be documenting?

Impact

Alternately, if you are one of the 2 guys jumping out of the plane, the impact is significant and should be considered.

We consider the combination of impact and probability to determine the Risk Exposure

Risk Exposure = probability of the occurrence   x   impact of the occurrence

For more information on risk assessments and creating a risk management plan, go to riskmp.com    or join us in a workshop … across Canada ….  Risk Management Workshop