Risk management - Budget vs Contingency part 2

Budget vs Contingency part 2

If a project plan is put together without the use of any risk management techniques then the total cost will be the sum of all of the individual assumed work package values.
The risk management process forces you to consider the correlation between tasks and the potential spread (via the 3 point estimate) of values.

This value is represented in the above diagram by the value having a risk of exceeding the cost of about 65%.
In other words, this cost is very likely to be exceeded.

The risk assessed total cost value would be set at the ‘20% risk of exceeding the value’.
The contingency could be set as the difference between this and the cost estimate without risk assessment.

Risk management - Budget vs Contingency part 2

Budget vs Contingency part 2

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