Risk Analysis Process

Risk Analysis is the process of assessing an event probability or a probability distribution.

The term is sometimes used in place of decision analysis. Many companies combine these as risk and decision analysis. Decision analysis is the more-common term for this general problem-solving process. In fact, there are often several risk analyses in a decision analysis.

Decision Analysis is the discipline that helps decision makers choose wisely under uncertainty. Three features characterize the formal process:

The organization has a quantified way of measuring value or progress toward the organization's objective. In business, the most common measure is present value of future net cashflows.
Judgments about risks and uncertainties are expressed as probabilities and probability distributions.
The expected value calculation condenses a range of possibilities into a single number. The usual decision policy is to choose the alternative having the best expected value.

Decision Precision^{^{^Ž}}

Training and assistance by John Schuyler, CAM CMA CMC CPIM PE PMP, Aurora & Denver, Colorado, USA

Risk and Decision Analysis in Projects by John Schuyler, 2001, Project Management Institute

Risk Analysis Process

Decision PrecisionŽ

Decision Precision^{^{^Ž}}