Tag Your Risk

Cost overruns have the potential to risk entire projects and can be assessed by quantitative measures. The cost of conducting a quantitative assessment is always greater than 0. Practice Standard for Project Risk Management explains that “the benefits for quantitative risk analysis should be weighed against the effort required to ensure that the additional insights and value justify the additional effort.” Thomas Sowell made the same case in his book Knowledge and Decisions with regards to the political economy. While the cost is certainly greater than 0, the reward for a quantified assessment can help identify areas of concern that could easily have been overlooked during a qualitative assessment in favor for issues that are easier to define and narrate.

Because quantitative assessments rely heavily upon the numerical tool set in our lexicon, they provide us with all the advantages inherent in that tool set. Just as price tags summarize the inherent knowledge of the production and transportation of an item to the consumer, so too does a quantitative risk assessment translate and consolidate a broad spectrum of detailed information into a summarized form. In this case it gives the price tags for all of the project and allows us another layer of information to swim through on our search for opportunities to improve outcome. When it comes to risk reduction this information is key to helping to justify risk mitigation expenses by showing their contributions to improving the project’s likelihood of success.