Risk management - Evaluate - negative correlation
The Risk Management process
EVALUATE - negative correlation
If we have two activities ‘A’ and ‘B’ they may have negative correlation. If the duration of ‘A’ is longer than expected we often try to reduce the duration of the next dependent task to compensate and ‘catch up’ the time lost. This may be possible and results in extra costs.
By reducing the duration of ‘B’ it will have a ‘negative correlation’ with respect to task ‘A’.
In other words, when ‘A’ takes on a particular value ‘B’ takes on a the ‘opposite’ value for 100% correlation.
For example,
Probability for ‘A’ or ‘B’
| Delay | Probability |
|---|---|
| 7 | 0.3 |
| 9 | 0.5 |
| 11 | 0.2 |
If ‘A’ has the value of 7 weeks then ‘B’ will be 11 weeks and vice versa for 100% correlation.
This effect can dramatically reduce variability as one value ‘off sets’ another. Full 100% correlation could, in theory, eliminate variability completely.
It is clear that positive correlation should be avoided and negative correlation welcomed.
From the point of view of project management [see ‘The Complete Project Management package’] and [see 'The Complete Project Management plus PRINCE2'] it should not be assumed that positive and negative correlation would eliminate each other.