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Risk Management

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: 2 heads pays $10

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Risk Management

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  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: • 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 • 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.

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