Risk management - Uncertain events
Uncertain events
So far we have looked at activities which have only one pathway i.e. they depend on only one EVENT.
However, many activities often depend on more than one EVENT or OUTCOME.
We have seen the introduction of proactive plans. These are activities that are put in place to try to prevent a risk occurring.
Contingency plans are reactive and require a trigger in the plan to implement a set of activities to minimise the affect of a risk that is just about to occur.
The following example is where two possible pathways (branch point) may occur and you have to allow for the occurrence of both.
In effect, one path is the one you hope will be the case and the second is the one that might happen but we hope will not.
The latter pathway is the ‘contingency’ plan which will require a trigger before refining and implementing.
For example:
Let’s say the project requires a total of 10 pumps.
If we look at the uncertainty in the COST (due perhaps to alternative suppliers) we can suggest a range of total costs for the 10 pumps.
| MINIMUM | = £10,000 |
| MAXIMUM | = £15,000 |
| LIKELY | = £12,500 |
But what if we are not really sure whether we need 10 pumps or possibly 15 pumps?
Here we would be trying to ascertain the range of costs for 2 possible outcomes.
The fact there are 2 possible pathways should not be confused with an alternative approach or CONTINGENCY plans, which have a specific trigger if a risk is about to materialise.
Strictly speaking this example is different as the pathway 1 will occur (100% for 10 pumps) and we are concerned with if we will need another 5 or not.
However, it is simple and demonstrates the analysis for ‘branching points’.
Consideration should be given to these ‘uncertain events’ when drawing up the plan.