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Make or Break: Why Accurate Cost Estimation Is Key
December 2, 2008
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Lessons Learned for Project Managers - Part XIII
December 2, 2008
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Project Implementation - Training
December 1, 2008
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Risk Characteristics
December 1, 2008
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Clarity - MS Project Best Practices
December 1, 2008
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Reasons for not Having the Right Project Sponsorship
November 30, 2008
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Operations and Maintenance - Lessons Learned from Major Programs
November 30, 2008
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Lessons Learned for Project Managers - Part XII
November 30, 2008
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Quality Control in Project Management
November 30, 2008
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Categorization of Risks in Project Risk Management
November 29, 2008
A Risk Management Lesson - Evaluation
March 30, 2008 | Author: admin | Filed under: Risk Management, Risk Quantification & Analysis
A Risk Management Lesson - Evaluation (#2 in the series A Risk Management Lesson)
By Andy Murray
When evaluating a risk we need to consider:
- Impact
- Likelihood of occurrence
- Detection rate
- Consequences
Impact - We have identified (some of) the impacts already, e.g. cost of alternate travel
Likelihood of occurrence - for UK only, we can take recent history as a means to predict the future. In the past two years we have had four incidents which have affected UK transport
(Ref wikipedia).
So one could take a view that the likelihood is on average 1 in 91 that when you travel there might be a terrorist incident on that day (based on there being on average 2 days disrupted travel for each incident).
Or if you applied the fact that terrorist activities in the US and Europe only take place on weekdays then you could argue that the likelihood is in fact 1 in 65 if you travel during the week and close to zero if you travel at the weekend.
We could argue further that since all recent terrorist incidents in the UK have taken place on Thursdays the odds reduce to 1 in 26. So if you travelled from one of the UK airports every Thursday then it is reasonable to expect to be inconvenienced from air travel disruption caused by terrorist activity approximately twice a year.
Detection - where likelihood rates are low (as in the above analysis) it is useful to determine if you are able to detect when a risk is about to occur. In this instance we only have the UK security ratings as guidance.
- Low - an attack is unlikely
- Moderate - an attack is possible, but not likely
- Substantial - an attack is a strong possibility
- Severe - an attack is highly likely
- Critical - an attack is expected imminently
The problem here is that the Home Office have only raised threat levels to Critical after the event. So instead look at the ‘direction of travel’ for indicators - for example the threat level has recently been downgraded to Severe.
Consequences - These are the downstream issues that the direct impacts cause. Taking our earlier list of impacts these could be:
- Cost of alternative travel - none
- Cost of hotel if alternate travel was not possible - none
- Missed meetings - delayed orders, lost orders, effort to re-schedule
- Missed training event - next one might not be for 3 months
- Missed exhibition - no new sales leads
- Laptop damaged when in hold - immediate loss of tool, possible lost data, days to rebuild
- Can’t bill for your time - cashflow pressure (and you can’t sell yesterday tomorrow)
Andy Murray is a director of Outperform UK Ltd, a management consultancy helping clients improve their bid, project and programme management performance through the practical application of structured methods. Outperform is an Accredited Consulting Organisation (ACO) and is ISO 9001 certified. Andy previously sat on the Executive Committee for Best Practice User Group™ (BPUG™) which represents users on behalf of OGC for their best practice trilogy of PRINCE2™, Managing Successful Programmes (MSP) and Management of Risk (M_o_R®). Andy’s runs a professional blog, PRINCE2:2009 Project, where he shares his thoughts about PRINCE2.
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