I'm busy with an update on our risk register. Looking at the risk categories I'm wondering if costs or budget is a separate risk category as each risk most often has a cost impact. Does it make sense to integrate costs in each line of the risk register (per defined risk). I'm thinking to add a column for costs mitigating actions and costs of risk detected or will this become too complex. Any advise? Saving Changes...
I would consider cost a risk attribute rather than a risk category. Categorizing things is done for the utility gained by having specific groupings, such as common solutions you might apply to address many risks of the same type.
As an attribute, cost is an excellent way to rank risks. Assigning costs creates an objective system we can use to normalize other risks of different impacts. For example, you could have a schedule delay attribute as well, and convert that to some cost value to compare against pure cost risks like the market price of some commodity. You might not be able to quantify all risks in terms of cost easily, in which case you could still rank them as high, medium, low and give some nominal value to each ranking so they can be at least roughly compared to others.. Saving Changes...
FWIW, I agree that Cost is an attribute, not a category, and something that you should assess when performing quantitative risk analysis.
"Quantitative risk management in project management is the process of converting the impact of risk on the project into numerical terms. This numerical information is frequently used to determine the cost and time contingencies of the project."
Meyer, W. G. (2015). Quantifying risk: measuring the invisible. Paper presented at PMI® Global Congress 2015—EMEA, London, England. Newtown Square, PA: Project Management Institute.
Risks often have multiple points of impact when realized. For contingency reserve and schedule buffer purposes, there is value in differentiating between the different points of impact, but you should also account for other impacts such as to quality, resources, and stakeholder engagement.
Kiron Saving Changes...
Alan BergsmaDirector of Project Risk Management| ALB ConsultingParadise Point, Qld, Australia
Hi Marcel,
There is no one answer to your question. I would consider how you are going to report on the risks before deciding to include "cost" as a category or attribute.
I usually classify "cost" as a category as I find it fits in well with how my sponsors want me to report on risks.
When I encounter risks that impact both "schedule" and "cost" I usually separate them out as two risks in the risk register. Separating them out makes a clean feed into category based reporting. And, sometimes you can find risk response plans that are independent of the categories.
Good luck! Saving Changes...
Thanks for your advise and links received up to now. I will also discuss this again with our management to determine how to deal with the cost component in the risk register. Saving Changes...
Dear Marcel,
The best way to manage risk is by linking all information related to each one. It is easier for the team and stakeholders to follow it to assign a prioritization and the resources for its mitigation. Thus, the risk register must show all historical information from the notification until the risk is closed because it facilitates the searching and the implementation of actions.
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1 reply by Marcel van der Meer
Jun 09, 2021 6:49 AM
Marcel van der Meer
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Dear Elena, you mean linking all information by putting all information in one line of the risk register. (One line per event showing the impact on costs, schedule etc.
Dear Marcel,
The best way to manage risk is by linking all information related to each one. It is easier for the team and stakeholders to follow it to assign a prioritization and the resources for its mitigation. Thus, the risk register must show all historical information from the notification until the risk is closed because it facilitates the searching and the implementation of actions.
Dear Elena, you mean linking all information by putting all information in one line of the risk register. (One line per event showing the impact on costs, schedule etc. Saving Changes...
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