1. Risk Management
SOS ch 6

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

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

4. 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?

5. Example 6.3

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

7. 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

8. 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?

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

10. 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?

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