Creating a Probability Impact Matrix

Each identified risk is fed into a probability-impact matrix, as seen in Figure 11-4. The matrix maps out the risk, its probability, and its possible impact. The risks with higher probability and impact are a more serious threat to the project objectives than risks with lower impact and consequences. The risks that are threats to the project require quantitative analysis to determine the root causes, the methods to control the risks, and effective risk management. We'll discuss quantitative risk management later in this chapter.

The project is best served when the probability scale and the impact scale are predefined prior to qualitative analysis. For example, the probability scale rates the likelihood of an individual risk happening and can be on a linear scale (.1, .3, .5, .7, .9) or the scale can be the ordinal scale. The scale, however, should be defined and agreed upon in the risk management plan. The impact scale, which measures the severity of the risk on the project's objectives, can also be ordinal or cardinal.

By identifying and assigning the scales to use prior to the process of qualitative analysis, all risks can be ranked by the system, including future identified risks. A shift in risk-rating methodologies mid-project can cause disagreements with regards to how the project risks should be handled.

A probability-impact matrix multiplies the value for the risk probability by the risk impact, giving a total risk score, as seen in Figure 11-5. The risk's scores can be cardinal, and then preset values can qualify the risk for a risk response. For example, an identified risk in a project is the possibility that the vendor may be late in delivering the hardware. The probability is rated at .9, but the impact of the risk on the project is rated

Figure 11-4

A probability-impact matrix measures the identified risks within the project.

Odds and impact

Risk

Probability

Impact

Risk Score

Data loss

Low

High

Moderate

Network speed

Moderate

Moderate

Moderate

Server downtime

High

Low

Moderate

E-mail service down

Low

Low

Low

Each identified risk z

Subjective score

Each identified risk z

Subjective score

Project Management Made Easy

Project Management Made Easy

What you need to know about… Project Management Made Easy! Project management consists of more than just a large building project and can encompass small projects as well. No matter what the size of your project, you need to have some sort of project management. How you manage your project has everything to do with its outcome.

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