A5.14 There are a range of possible values for any risk. A probability distribution recognises some are more likely than others. An example is given below in Box 22. While some risks have low probability, they may have significant impacts on project outcomes and need to be closely managed by Senior Responsible Officers (SROs).
Box 22. Example of Multi-Point Probability
Case study: Expected costs of a construction project using multi-point analysis A facility is estimated to cost £50m to build. The expected costs associated with construction uncertainties are: | |||
Possible cost (£m) | Difference from estimated cost (£m) | Estimated probability of the event occurring | Risk value (£m) |
45 | -5 | 0.1 | -0.5 |
50 | 0 | 0.6 | 0 |
55 | + 5 | 0.3 | + 1.5 |
The most likely result is no extra cost (probability 60%). However, the expected additional cost (the sum of each possible result multiplied by its probability) is £1 million. | |||