RISK MANAGEMENT

-Risk planning -Risk management -Applying the PERT technique

Risk Planning

Risk acceptance Risk avoidance Risk reduction and mitigation Risk transfer

Risk Acceptance
Do-nothing option
The damage inflicted by some risks would be less than

the cost of that action that might reduce the probability of risk happening

Risk avoidance
Avoiding the risk occurrence

Risk reduction
Precaution that reduce the probability of the risk
Eg:- Brigette had a problem at Brightmouth college

- Payroll system - Richard Failreys four COTS (commercial off-the-shelf)

Risk Transfer
Risk transfer is what effectively happens when you buy

insurance
Risk transferred to another person or organization Outsourcing

Risk Management
Contigency Deciding on risk action Creating and maintain risk register

Exercise

 Risk exposure value can be calculated as financial value

=value of damage X probability of occurrence

Risk reduction leverage= (RE before RE after)/(cost of risk reduction)

Applying PERT Technique

PERT(Program Evaluation and Review Technique) was

Developed for Fleet Ballistic Missiles Program it is said to have saved considerable time in development of Polaris missile
PERT was developed to take account of the uncertainty

surrounding estimates of task duration.

PERT requires three estimates

Most likely time (m)
Optimistic time (a) Pessimistic time (b)

PERT then combine these three estimates to form single expected duration te = ( + 4 + )/6

 FIG 6.29 to be insert

 Activity standard deviation- it is obtain by calculating the

standard deviation(s) of an activity time

 Calculating z values =

T - target date te - expected date

Advantages of PERT
We can use the technique to calculate the standard

deviation for each task and use this to rank them accordingly to their degree of risk
If we use the expected times and standard deviation for

forward passes through the network we can estimate the probability of meeting any set target. In particular by setting target dates along the critical path, we can focus on those activities posing the greatest risk to the project's schedule.

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