Risk Assignment/Project Mgt.

Risk Assignment/Project Mgt.
Objective
This assignment is intended to address Course Objective 3 – Evaluate project risk using quantitative methods and a systems approach. It includes one topic in the Course Outline:

Systems and procedures for planning and control, (f) Project risk management
Reference
• Project and System Definition – Nicholas & Steyn – Ch. 10
• Ch.10 Power Point
• Risk Assessment Calculations.docx

Assignment

Submit the assignment in Word or .pdf document to the appropriate Dropbox.

1. Risk Likelihood (4 pts.)

A product improvement project involves an existing product (M), with minor complexity (C), and is dependent for schedule on an existing system (D). Therefore,
M = 0.1, C = 0.3, D = 0.3
(as reference Risk Assessment Calculations document, Likelihood table).

Consider that criteria are weighted as follows:
M is (0.5), C is (0.3), D is (0.2), therefore W1 = 0.5, W2 = 0.3, W3 = 0.2

Calculate the Composite Likelihood Factor (CLF).
2. Risk Impact (4 pts.)

A product test failure is expected to have a minor impact on overall technical performance and be correctable within 2 months at a cost of 10 percent. Therefore,
TI = 0.3, CI = 0.5, SI = 0.5
(as per reference Risk Assessment Calculations document, Impact table).

Consider that criteria are weighted as follows:
TI is Moderate (0.5), CI is Minor (0.3), SI is Low (0.2) therefore W1 = 0.5, W2 = 0.3, W3 = 0.2

Calculate the Composite Impact Factor (CIF).

3. Risk Consequence Rating (4 pts.)
Use the previous problems (#1 Risk Likelihood and #2 Risk Impact) and calculate the Risk Consequence Rating (RCR).

5. Risk Time (RT), Risk Cost (RC), Expected Time (ET), Expected Cost (EC) (8 pts.) Critical Path (L – V – R – C)

Below is a table with calculated Risk Time (RT) and Risk Cost (RC) for all the WBS elements (individual values and total values). These calculations are based on the information in the table above.

WBS
ELEMENT RC in dollars
(corrective time x likelihood) RT in weeks
(corrective time x likelihood)
L $800 0.4 weeks CP
V 1,200 0.6 CP
T 80 0.2
U 2,400 0.6
S 1,200 0.3
J 400 0.1
R 1,200 0.9 CP
C 1,500 0.6 CP
TOTAL $8,780.00
3.7 (CP = 2.5)

Given the information in the tables above. Hint: Use the critical path for RT (L – V – R – C_ .
a) What is the project expected cost (EC) for the total project? (4 pts.)
b) What is the project expected time (ET) for the total project? (4 pts.)
4. Decision Tree (5 pts.)
An author decides to write a book. Historical data indicates that if the market is strong, gross sales will be $1 Million. If the market is weak, the gross sales will be only $50,000. There is a 70% chance of a strong market and a 30% chance of a weak market.

The author must decide whether to use a publisher or self-publish the book himself. If he self-published the book, all the sales go to himself as the author. If he uses a published, the publisher will receive 10% royalty on sales.

The decision tree for the problem is shown below. Determine:

a) The expected value for the publisher branch/option. (2 pts.)

b) The expected value for the self-publishing branch/option. (2 pts.)

c) Which branch/option should the author take? (1 pt.)

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