Combining Risk Factors

In “Waltzing with Bears” Tom DeMarco and Tim Lister introduce the very useful concept of the “Uncertainty Diagram”, the probability distribution for project metrics such as delivery date, expenditure or benefit delivery. This is used, for example, to assess the likelihood of delay from a given risk.

However, they rely entirely on Monte-Carlo simulation. I believe that where the curve is defined by, or can be approximated by, a few discrete points, a relatively simple analytical solution can then be used in place of simulation.

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2 Responses to Combining Risk Factors

  1. John Burgess says:

    There is an underlying assumption to what you are doing that the risks impact in series rather than parallel. While this is clearly the safest (i.e. most conservative) assumption to make, I feel it does need to be made explicit.

    It is certainly possible to imagine situations in which risks impact in parallel – the opening of the channel tunnel rail link could have suffered from both from problems with the earth under the channel and difficulties getting planning permission for the rail lines to the tunnel. However, these should probably have impacted in parallel and so the combined impact would be simply the greater of the two rather than the sum.

    • Andrew says:

      I agree that there are a number of possible ways to combine the risks. My point is that it is possible to use analytical rather than simulation-based techniques, and I think John’s analysis supports that.

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