Risk Management SOS ch 6.

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Presentation transcript:

Risk Management SOS ch 6

Risks Bad things that might happen two aspects uncertainty - probability of happening loss - cost if it happens

Risk Exposure Expected value of the risk event Product of risk probability and cost

2 games – flip 2 coins Game A: Game B: Which is better? 2 heads pays $10 1 head costs $2 0 heads costs $4 Game B: Pay $2 to play 2 heads pay $10 No other combination pays Which is better?

Example 6.3

Risk Decision Tree The top level branch splits on alternatives Lower levels split on possible events

TTYP1 Assume that each additional review will cost an extra $6K but will cut in half the current probability of an error. Assume that an error in the delivered product would cost Company XYZ $800K. If the initial probability of an error is 5%, how many reviews should the company do? What if the initial probability of an error is 10% Draw the risk decision tree and calculate the risk exposure for each choice

TTYP2 – Deal/No Deal If you are the contestant and you have two boxes left: $1,000,000 and $10,000, should you deal if the deal amount is $500,000?

Risk Categories Project risks Technical risks Business risks budget, schedule, personnel, requirements Technical risks design, implementation, interface, testing problems Business risks product viability

Proactive How do we mitigate those risks? Planning which task to do first Using quality assurance tasks Monitoring progress How does this relate to life-cycle model?

Open House Just a reminder that Open House is from 9:00-3:00 on Saturday, April 14.