The Handbook of Project-based Management by J. Rodney Turner

Author:J. Rodney Turner
Language: eng
Format: epub
Publisher: McGraw-Hill Education
Published: 2009-07-14T16:00:00+00:00

10.3 ASSESSING RISK

Having identified possible sources of risk to the project, we need to determine their impact. First, we assess the impact of individual risks through qualitative assessment. On more complex projects, we can then determine their combined impact through quantitative analysis. What follows applies to insurable risks. The impact of business risks can be determined through three-point estimating as illustrated in Table 8.5.

The Impact of a Single Risk

The impact of a risk factor depends on its likelihood of occurring and the consequence if it does occur (Fig. 10.1):

Impact of risk = Likelihood of risk × Consequence of risk

To illustrate this concept, consider the question of whether buildings in the British Isles have earthquake protection. The answer is very few do. Multistory office blocks in London do not. The consequence of an earthquake in London of force 7 on the Richter scale would be severe loss of life. However, the probability of such an earthquake is so small, virtually zero, that it is considered unnecessary to take precautions. However, one type of building which does have earthquake protection is nuclear power stations. The likelihood of an

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