Risk Contingency

Submitted by nzahid on Sat, 11/06/2010 - 15:14

My question is that the scedule baseline can only be finalized when risk planning is complete. The book suggests you add the risk activities to the schedule which will add time in the schedule.

But nowhere have i found an explanation how the contingency is actually calculated. Are the risk response activities themself are added to the schedule even though they might or might not materialize?

Is it just a total of all response activities and is just added to the total project slack?

 

Please try to answer with a diagram if possible. I have the same question for Cost contingency and the cost baseline.

Thanks

Nauman Zahid

 

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PMzilla_binh

Sun, 11/07/2010 - 10:41

I have the same query as Zahid when studying and still could not get a satisfactory answer until now.

But in my best try to map personal experience, those contigencies activity will be added at each interval/milestone that we plan to do schedule/cost measurement.

For example, if schedule/cost measurement is planned to carry out monthly, and in Apr, we have 2 activity that has a total quantitative risk amount (impact * probability) is 2 days and 1K. I will add an contigency activity with 2 days and 1K at the end of this month.

Not sure if it's inline with PMI's way

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admin

Wed, 11/10/2010 - 04:37

if you add all risk reponse contingency to the schedule it will blow up , that is why you have the Qualitative and quantitative risk analysis to determine the risk exposure. For the risks that are almost certain to materialize and impacting schedule , you can add contingency there, Same for cost. 


As PM you should also take steps to mitigate each risk, so that it does not negatively impact the schedule or cost.


Practically in real world contingency is more calculated by experience with similar projects, and experience on how whether or not the risk can materialize. For eg, if you have the risk of resource leaving the project, you will know from your past projects that 10-15% people would leave, so you would budget that as contingency in your schedule and cost. Here you are almost certain that it would happen since that is the attrition data for your organization.