The first problem in assessing the probability of project risks is the term itself. There are a number of reasons for this, discussed below. Risk practitioners and project teams alike experience repeated difficulty in assessing the probability that a given risk might occur. Assessing impact is an exercise in structured imagination: “If this were to happen, what would the effect be?” The other dimension of risk is less amenable to assessment however. It is relatively simple to assess the impact of a risk, since this merely requires defining the situation after the risk has occurred, and then estimating the possible effect on each objective. In order for assessments of risk to be consistent and meaningful, attention must be paid to the way in which probability and impact are assessed. Risk management processes often include frameworks for determining the significance of a risk based on both probability and impact, such as the two-dimensional Probability-Impact Matrix (Project Management Institute 2000, 137). Similarly a risk may have such a low probability that it might not be worth considering even if some significant impact were theoretically possible. it has high probability) but which would have little or no effect on objectives (low impact) is not significant. Clearly an uncertain event which is likely to occur (i.e. When assessing the significance of any given risk, it is necessary to consider both dimensions. It is common to use the terms “probability” and “impact” to describe these two dimensions, with “probability” addressing how likely the risk event or condition is to occur (the uncertainty dimension), and “impact” detailing the extent of what would happen if the risk materialised (the effect dimension). A typical two-dimensional definition of risk in the realm of project management is “An uncertain event or condition that, if it occurs, has a positive or a negative impact on a project objective” (Project Management Institute, 2000, 127). The second is about what would happen were the risk to occur, since risks are defined in terms of their effect on objectives. The first relates to uncertainty, since a risk is something which has not yet happened and which may or may not occur. Although the precise wording of different definitions may vary, all agree that risk has two dimensions. There is broad consensus over the definition of “risk” among leading national and international standards and guidelines, as well as professional bodies (Simon, et al., 1997 Australian/New Zealand Standard AS/NZS4360, 1999 Project Management Institute, 2000 British Standards Institute, 2000 Institution of Civil Engineers, 2002 UK Office of Government Commerce, 2002 Institute of Risk Management, 2002). This paper presents a range of alternative techniques for assessing risk probability in an attempt to remove the subjectivity from this vital element of the risk management process. It is therefore important to be able to assess probability with some degree of confidence. Conversely, the process is undermined when probability assessment appears to be wholly subjective (a guess). The credibility and value of the risk process is enhanced if data are collected with care, taking the time and using the tools that are needed properly to develop information based on judgemental inputs. This is particularly true for projects where data on risk probability from previous projects is either not available or not relevant. While unambiguous frameworks can be developed for impact assessment, probability assessment is often less clear. Effective risk management requires assessment of inherently uncertain events and circumstances, typically addressing two dimensions: how likely the uncertainty is to occur (probability), and what the effect would be if it happened (impact).
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