Risk management - Quantitative method part 4
Quantitative method part 4
Cost
So, 4 man weeks are still required to provide the extra resource to complete the task. However, there is now only a 1 in 10 or 10% chance of this happening.
So the actual resource cost will be 0.1 x 4 = 0.4 man weeks.
This is the cost that would end put in the budget.
If consultation is required to assist in the assessment process then you will need to add this to the cost.
For example, if this is 0.5 man weeks then the cost will be 0.5 + 0.4 = 0.9 weeks.
Note: The consultancy cost must be in the budget at the full cost has this will be spent to assess the resource position.
The consultant is a person helping with the risk management process. An external consultant is probably better than having a separate department to manage the risk. The latter can separate the risk assessment from the management of the project and hence develop a lower awareness of risk within the project team. This may be the case initially but as internal resource gains more experience you may use consultants less and less.
Duration
There is a potential 2 week delay but now only a 1 in 10 risk or likelihood of it materialising, 10%.
So the value of the delay is 0.1 x 2 weeks = 0.2 weeks.
Again, this delay is not bound to happen. What we are doing is assessing the ‘risk’ of the delay. Hence, the potential cost would be an extra 0.4 (i.e. 0.2 weeks using 2 men, or 0.9 with the consultant fees) man weeks to be added to the project.
For this we estimate, especially using the consultancy, we may judge that the ‘likelihood’ of the risk occurring is reduced even further, to say 1 in 20 or 5%.