98 lines
3.0 KiB
Markdown
98 lines
3.0 KiB
Markdown
---
|
|
id:
|
|
aliases: []
|
|
tags:
|
|
- topic/risk
|
|
- type/encyclopedia
|
|
title: Risk
|
|
dg-publish: true
|
|
---
|
|
# Risk
|
|
|
|
%%
|
|
|
|
## TALK
|
|
|
|
This note is for the concept of risk
|
|
as understood by laymen and mathematicians.
|
|
|
|
## TODO
|
|
|
|
1. Relocate profession specific content to [[risk-management]].
|
|
|
|
2. If [[#In Cost Estimation]]'s content needs to remain,
|
|
and it isn't suited for [[actuarial-science-for-construction-estimating]],
|
|
another cross-topic [[risk-management-for-construction-estimating]] will be necessary.
|
|
I suspect that with some edits it will be most appropriate for [[actuarial-science]].
|
|
|
|
%%
|
|
|
|
Risk, in common parlance, is the chance that something "bad" will happen.
|
|
As such, it is generally understood as a binary, win/loss relationship.
|
|
|
|
This model of discrete probability is ubiquitous of
|
|
[[project-management-tm|Project Management™]],
|
|
and is the sort assumed when using risk registers.
|
|
|
|
> [!example]
|
|
> This scope of work presents a 1 in 10 chance of significant delay.
|
|
|
|
## In Cost Estimation
|
|
|
|
The prior model is well suited to project management,
|
|
which (being reductive) cares about why's,
|
|
where cost estimation only cares about the bottom line.
|
|
|
|
It is generally not useful for construction cost estimation.
|
|
Potential impacts sufficient to warrant documenting
|
|
should usually just be excluded.
|
|
|
|
Cost estimators usually understand risk in terms of continuous probability.
|
|
|
|
The reality of construction cost estimation is that there are _no_ certain costs.
|
|
Traditional construction estimates give a false impression of certainty
|
|
because they operate on and return fixed values.
|
|
With the most generous interpretation, they can be said to evaluate cost
|
|
in the most likely case of each axis of uncertainty.
|
|
|
|
> [!info] Escalation
|
|
> Projecting recent pricing to a later date of purchase
|
|
> based on anticipated market conditions.
|
|
|
|
> [!aside] ISO 31000
|
|
> [ISO 31000]([ISO 31000:2018 - Risk management — Guidelines](https://www.iso.org/standard/65694.html)) defines risk as the "effect of [[uncertainty]] on objectives"
|
|
> therefore referring to positive consequences of uncertainty, as well as negative ones.
|
|
>
|
|
> The standard gives a list on how to deal with risk:
|
|
>
|
|
> 1. Avoiding the risk by deciding not to start or continue with the activity that gives rise to the risk
|
|
> 2. Accepting or increasing the risk in order to pursue an opportunity
|
|
> 3. Removing the risk source
|
|
> 4. Changing the likelihood
|
|
> 5. Changing the consequences
|
|
> 6. Sharing the risk with another party or parties (including contracts and risk financing)
|
|
> 7. Retaining the risk by informed decision
|
|
|
|
## Risk Tolerance
|
|
|
|
Determining risk tolerance is a task usually appropriated by executives
|
|
(often based on [[gut-feel]]),
|
|
but that is better determined mathematically.
|
|
|
|
[Risk of ruin](https://en.wikipedia.org/wiki/Risk_of_ruin)
|
|
|
|
## Risk Analysis and Management
|
|
|
|
### Risk Registers
|
|
|
|
Risk Registers are a standard method of documenting [[risk]].
|
|
They are a hallmark of [[project-management-tm]] practice.
|
|
|
|
### Simulation
|
|
|
|
[[monte-carlo-methods]]
|
|
|
|
## Resources
|
|
|
|
* [[the-failure-of-risk-management]]
|