Inf 3708 Chapter 7

CHAPTER 7: RISK MANAGEMENT (SUMMARY)

The chapter in the textbook that corresponds to this unit deals with the very important topic of risk identification and management when confronted with the development of software projects. Study Chapter 7 in the textbook carefully and ensure that you understand, and can apply, the different topics introduced.

Unit objectives:

The aim of Chapter 7 of the textbook is to introduce the following concepts:

▪ the nature of risk;

▪ types of risk;

▪ management of risk;

▪ identification of risk;

▪ analysis of risk;

▪ reducing risk by means of planning and control;

▪ evaluating risk to project schedules; and

▪ calculating Z values.

Unit outcomes:

After studying Chapter 7 of the textbook, you will be able to:

▪ identify the factors putting a project at risk;

▪ categorise and prioritise action for risk elimination or containment; and

▪ quantify the likely effects of risk on project time-scales.

One method that is mentioned in this section is the PERT method. The difference between the CPM and the PERT methods is that the CPM uses a single estimate for the duration of each task, whereas the PERT method uses 3 estimates. These 3 estimates include:

* Optimistic (a)

* Most Likely (m)

* Pessimistic (b)

These 3 estimates are combined to calculate the te values. The formula is depicted below:

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After the te values are calculated, the standard deviation(s) can be calculated using the following formula:

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The next step is to calculate the z value. The formula to calculate the z value is depicted below:

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Remember that the T value is the target date of the specific project and the z value is calculated on the last activity.

Consider the following example:

In the table below the optimistic, most likely and pessimistic values are shown. The table also indicates the expected and standard deviation....