Calculating Risk Probabilities

Calculating the probability of one risk assigned to multiple tasks

What happens if the risk is assigned to multiple tasks? How to prioritize risks in this case? Here is an example. A Mexican drug lord El Stuppo wants to escape from jail. To do so, he is digging a tunnel from his side, and his associate is digging a tunnel from the opposite side. They are hoping to meet somewhere in the middle. But there is a risk that the tunnel may collapse. So, there is a single risk, but we have to assign it to different tasks: “El Stuppo digging” and “Associate digging” with probabilities of 30% and 40% respectively. What would be the total probability of this risk?

Everything depends on how these assignments are correlated. Let’s assume that the collapse is caused by heavy rain, which can occur at the same time on both sides of the tunnel. In this case, the risk assignments are correlated, and probabilities are equal to maximum probability of both assignments: 40%. If risk assignments are not correlated, then probability is calculated as is shown in the table below.

Calculated Impact and Probabilities of Event Chain

In addition to calculating probability and impact of individual risk events, we can rank event chains. To do this, we need to investigate if the event chain has been fully executed. In some cases, one event can occur, but does not trigger another event. Remember that a receiver event may be triggered with a certain probability. When this is determined, we calculate the cumulative impact of the event chain, rather than the individual risks.

If an event chain is fully executed, the cumulative impact of this event chain on all tasks to which the events from the chain are assigned is calculated. The next step is to calculate the correlation between event chain impacts and project results. Again, this is a similar process to the analysis we perform on individual risk events and this will allow us to rank event chain based on how they impact specific project parameters. In our next post, we will look at how we can forecast the impact of these risk events on project cost, duration and finish times.