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Describe How To Use A Probability

The Probability/Impact Matrix technique involves listing risks and rating their probability of occurring and potential impact as high, medium, or low. This allows risks to be visualized on a chart and prioritized. The Top Ten Risk Item Tracking approach involves regularly monitoring the top risks and tracking their resolution progress. Decision trees can be used to quantify risk by modeling choices and their potential monetary outcomes. Monte Carlo analysis simulates a model multiple times using variable distributions to determine a statistical result distribution. Both techniques could be used on an IT project to quantify time or cost risk.

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63 views2 pages

Describe How To Use A Probability

The Probability/Impact Matrix technique involves listing risks and rating their probability of occurring and potential impact as high, medium, or low. This allows risks to be visualized on a chart and prioritized. The Top Ten Risk Item Tracking approach involves regularly monitoring the top risks and tracking their resolution progress. Decision trees can be used to quantify risk by modeling choices and their potential monetary outcomes. Monte Carlo analysis simulates a model multiple times using variable distributions to determine a statistical result distribution. Both techniques could be used on an IT project to quantify time or cost risk.

Uploaded by

Vikram Kumar
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd
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Describe how to use a probability/impact matrix and the Top Ten Risk Item Tracking

approaches for performing qualitative risk analysis. How could you use each technique
on a project?

Answer

The Probability / Impact Matrix or Chart shows the relative probability of risk occurring from
one side of the chart's matrix or axis and the relative impact of risk occurring on the other
side. List the risks and list each risk as high, medium, or low in terms of the probability of
occurrence and the impact if it occurs. For example, Cliff Branch and some project managers
in the Getting Started example can each identify three negative potential risks for a particular
project. You can then classify the probability and impact of each risk into high, medium, or
low. The team can then view all the risks in a matrix or graph, or combine common risks to
determine where these risks are in the matrix or chart. The next team should focus on the risk
corresponding to the higher part of the probability/impact matrix or chart.

Top Ten Hazard Tracking A useful tool to identify risks and stay conscious throughout the
life of your project. It is used during the regular risk management of this project or review by
the Steering Committee. An overview of the current ranking prior to the ranking, the number
of times a risk has been listed over a period of time, and the progress of resolution of the risk
item is displayed. Risk management reviews serve several purposes. First, make sure
management and customers (if included) are aware of any significant impacts that could
impede or enhance the success of the project. Second, by attracting customers, the project
team can review alternative strategies to address the risk. Third, by reviewing, promoting
confidence in the project team by indicating to management and clients that the team is aware
of significant risks and implements the strategy and effectively executes that strategy.

Explain how to use decision trees and Monte Carlo analysis for quantifying risk. Give
an example of how you could use each technique on an IT project.

Answer

Decision tree A diagrammatic analysis method used to select the best course of action when
future outcomes are uncertain. A common application of decision tree analysis involves the
calculation of an expected monetary value. For example, in the first case, the Cliff Branch
Company was trying to decide whether to submit either project 1 project 2 two project
proposals or none. You can draw a decision tree with 2 branches, one for team project 1 and
one for project 2. Such a company can calculate the expected monetary value of making this
decision.
Monte Carlo analysis simulates the results of a model multiple times to provide a statistical
distribution of the calculated results.

The basic steps for Monte Carlo analysis are as follows:

1. Collect most likely optimistic and pessimistic estimates of the variables in your model.

2. Determine the probability distribution for each variable.


3. Select an arbitrary value for each variable, such as task time estimation, based on the
variable's probability distribution.

4. For each variable, perform a deterministic analysis using the selected combination of
values or go through the model once.

5. Repeat steps 3-4 to acquire the probability distribution of the model results.

Monte Carlo analysis can predict the probability or cost of completion by a particular date
less than or equal to a particular value.

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