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# Thread: How do YOU calculate Risk?

1. ## How do YOU calculate Risk?

Hi all,
I'm currently working on questions for a test for potential senior testers. I started writing a question regarding Risk Analysis and remembered seeing calculations for Risk in these forums that were slightly different from the calculations used at my company.

So, my main question is, what factors do you use to calculate Risk? And what is your calculation?

Gail

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2. ## Re: How do YOU calculate Risk?

I conducted a search (in the top right corner) for the word "Risk". In the General Discussion area, it came up with this thread which you may find helpful:

http://www.qaforums.com/Forum15/HTML/000519.html

I would suggest that you conduct this same search, as it came up with 70 related threads.

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3. ## Re: How do YOU calculate Risk?

What I want to know is what is your exact calculation and what are the factors? I didn't want to colour the responses in any way by stating the factors used here but looks like I must and on second thought it shouldn't "colour" responses at all. Basically, we base Risk on Impact and Likelihood. Does anybody not base Risk on these factors? Does anybody base Risk on these factors as well as others?

Gail

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4. ## Re: How do YOU calculate Risk?

We do cost-benefit analysis, looking at the cost of fixing, the cost of not fixing, and the revenue the software will generate.

Let's say your current release is 5 days from implementation and will save \$5,000 per day when installed in production. New business requirements come down with a change that will add another 5 days to the current schedule, but the new requirements will save another \$10,000 per day, for a total of \$15,000 per day. However, if the new requirements do not go in this release, they will have to go in the next release in 15 days. Let's say each day of development costs \$5,000.

Plan A is to put in the project as is, without the new requirements. So, in 5 days the project is installed and will begin saving \$5,000 per day. In the next release (15 days later), the new requirements will go in, and begin saving an additional \$10,000 per day. Those requirements will still cost 5 days of development, so the first 5 days of the current requirements' savings will pay for the new requirements' development.

Plan B is to put the current project on hold and install the new requirements. So, it will cost an additional 5 days of development (at \$5,000 per day.) Additionally, for those first days you technically have a slipped schedule and a paper loss. Afterall, you aren't saving the money you planned and you are spending more money. This is where management will get angry, but tell them to consider it an investment.

Day one is the implementation date of Plan A. Day sixteen is when the new requirements are implemented in Plan A. Day six is when all requirements are implemented in Plan B. Day eight is when Plan B becomes more profitable than Plan A. Plan B will ultimately save the company an additional \$100,000.

<pre>
PLAN A PLAN B
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01 \$ 0000 \$ -5000
02 \$ 0000 \$ -10000
03 \$ 0000 \$ -15000
04 \$ 0000 \$ -20000
05 \$ 0000 \$ -25000
06 \$ 5000 \$ -10000
07 \$ 10000 \$ 5000
08 \$ 15000 \$ 20000
09 \$ 20000 \$ 35000
10 \$ 25000 \$ 50000
11 \$ 30000 \$ 65000
12 \$ 35000 \$ 105000
13 \$ 40000 \$ 120000
14 \$ 45000 \$ 135000
15 \$ 50000 \$ 150000
16 \$ 65000 \$ 165000
17 \$ 80000 \$ 180000
18 \$ 95000 \$ 195000
</pre>
BTW, this example shows why scope creep is not inherently bad. Had to sneak that in, on a discussion on risk management!

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Thanks,
Tim Van Tongeren
(formerly user:vantontl)

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