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Risk management - Cumulative probability graph

Cumulative probability graph

Cumulative probability graphCumulative probability graph

This shows the cumulative probability graph for ‘A’ and ‘B’ independent and compares the combined ‘A’ and ‘B’ with positive correlation [see Risk Management process - Evaluate - positive correlation].


Probability for ‘A’ or ‘B’

DelayProbability
70.3
90.5
110.2

Probability for ‘A’ and ‘B’ positive dependence (100% correlation).

DelayProbability
140.3
180.5
220.2

Probability for ‘A’ and ‘B’ independent (0% correlation).

DelayCalculationProbability
140.3 x 0.3    0.09
160.3 x 0.5+0.5 x 0.3  0.30
180.3 x 0.2+0.5 x 0.5+0.2 x 0.30.37
20  0.5 x 0.2+0.2 x 0.50.20
22    0.2 x 0.20.04

Based upon the two above extremes.
What is the probability of the delay exceeding 21 weeks?

Well, for independent (0% correlation) the graph show that there is approximately 4% risk of exceeding 21 weeks delay (1.0 – 0.96).
In the case of the full positive dependence (100% correlation) there is approximately 15% risk of exceeding 21 weeks delay (1.0 – 0.85).
The actual value may be somewhere in between.

The analyst must allow a suitable correlation that is not at one extreme or the other.