The $15 extra cost should be part of the Contingency Reserves to be added to the Total Cost Estimate to arrive at the Cost Baseline, which is the direct responsibility of the Project Manager. Because the amount $15 is an aggregation of the EMVs of 3 Individual Project Risks, one of the two types of Project risks (Individual and Overall Project Risk) to be looked over/taken care of by the Project Manage. My question is what happens if the EMV exceeds - $15, let's say it pans out to be -$55. Who will be responsible for the difference of -$40 ($15 - $55) and how do we manage the difference as Project Managers?
Hi Ibrahim, if your question is around additional funding for the project then, no matter how small or big, it will always have to come from the sponsor. As a Project Manager, being able to deliver the project within the cost is very critical. Correct forecasting, continuous monitoring, documentation and communication are just few of the many steps a Project Manager must take to ensure the cost isn't exceeding the budget.
hello, who funds the extra money for the emv? i think the board allocates contingency reserve for a project and in this case it is called expected monetary value and allah knows best right ?
Thanks for explaining it really well. You have mentioned the probability of each and the associated costs if they occur. My question is, how do I come up with the cost of each risk? Is there a way/method useful for quantifying risks? Kindly provide your insights.
This is a contingency reserve that will be added to the project estimate and the whole become cost baseline. In case, all risks occurred irrespective of probability which were calculate, the impact would be high and this contingency reserve is not enough. what will happen if this situation happens? I think this EMV and contingency work based on insurance company how they work. Ex: A car Insurance company charging premium is less when compare to sum assured (impact) because the probability of car accident is less. Even if one car accident happens, they will pay the claim to consumer, but it's presumed that not all cars get into accident and damaged at the same time.
Nice explanation, I have a question and hope you will answer to it. In your example of server hardware failure. The chances of failure is 15 %, but if it fails ( 100% chances) it will incur $300. Now my question is what is the need of calculating at 15 % probability rather than at 100 %? Bcz if server fails it will cost us $300 not $45.
15% is just a prob. of that risk ( if we ignore that risk(not identify the risk), it may lead to the issue ie: 100%) and correct me if my explanation is not apt
@@dineshkumar-zg7zf In my opinion and lots of other professionals, EMV is a flawed metric, because it gives you a result that is not practically useful.
@@dineshkumar-zg7zf Expected value is calculated by multiplying the impact value of a risk by the probability that the risk will occur. So if the risk impact is $ 300 and the risk probability is 15% then the Expected value is $ 300x 15% = $ 45. The problem with expected value is that it isn't useful. If the risk occurs it will cost $ 300. If it doesn't occur it will cost zero. It will never cost $ 45. So if you use the expected value to calculate contingency or risk budget, you will get the wrong answer.
Check out more Risk Management videos here goo.gl/3a91nD
As all these are known risk , it will come from contingency reserve
The $15 extra cost should be part of the Contingency Reserves to be added to the Total Cost Estimate to arrive at the Cost Baseline, which is the direct responsibility of the Project Manager. Because the amount $15 is an aggregation of the EMVs of 3 Individual Project Risks, one of the two types of Project risks (Individual and Overall Project Risk) to be looked over/taken care of by the Project Manage.
My question is what happens if the EMV exceeds - $15, let's say it pans out to be -$55. Who will be responsible for the difference of -$40 ($15 - $55) and how do we manage the difference as Project Managers?
Hi Ibrahim, if your question is around additional funding for the project then, no matter how small or big, it will always have to come from the sponsor. As a Project Manager, being able to deliver the project within the cost is very critical. Correct forecasting, continuous monitoring, documentation and communication are just few of the many steps a Project Manager must take to ensure the cost isn't exceeding the budget.
hello,
who funds the extra money for the emv? i think the board allocates contingency reserve for a project and in this case it is called expected monetary value and allah knows best
right ?
hi Nassim, this video should help explain who pays for any changes along the way in the project ruclips.net/video/Tg96Y6oHdVk/видео.html
Thanks for explaining it really well.
You have mentioned the probability of each and the associated costs if they occur. My question is, how do I come up with the cost of each risk? Is there a way/method useful for quantifying risks? Kindly provide your insights.
This is a contingency reserve that will be added to the project estimate and the whole become cost baseline. In case, all risks occurred irrespective of probability which were calculate, the impact would be high and this contingency reserve is not enough. what will happen if this situation happens?
I think this EMV and contingency work based on insurance company how they work. Ex: A car Insurance company charging premium is less when compare to sum assured (impact) because the probability of car accident is less. Even if one car accident happens, they will pay the claim to consumer, but it's presumed that not all cars get into accident and damaged at the same time.
Contingency budget will cover this.
Great video thank you so much !
My pleasure Shabrielee. Don't forget to subscribe for more 😊👍
It will be part of contingency reserve which is part of cost baseline
Nice explanation,
I have a question and hope you will answer to it.
In your example of server hardware failure. The chances of failure is 15 %, but if it fails ( 100% chances) it will incur $300. Now my question is what is the need of calculating at 15 % probability rather than at 100 %? Bcz if server fails it will cost us $300 not $45.
15% is just a prob. of that risk ( if we ignore that risk(not identify the risk), it may lead to the issue ie: 100%) and correct me if my explanation is not apt
@@dineshkumar-zg7zf In my opinion and lots of other professionals, EMV is a flawed metric, because it gives you a result that is not practically useful.
@@dineshkumar-zg7zf Expected value is calculated by multiplying the impact value of a risk by the probability that the risk will occur. So if the risk impact is $ 300 and the risk probability is 15% then the Expected value is $ 300x 15% = $ 45. The problem with expected value is that it isn't useful. If the risk occurs it will cost $ 300. If it doesn't occur it will cost zero. It will never cost $ 45. So if you use the expected value to calculate contingency or risk budget, you will get the wrong answer.
The Project Sponsor would be the one to approve/fund the extra $15
this is unknown known risk so this can be taken from contingency reserve, project manager can approve this
Contingency Budget?
Project Sponsor?
The answer for the question is the project owner.
Project Owner isn't really a position in the PMP world, can you be more specific 🙂
Since it is just 15$ the PM himself can fund this
😂😂
😂😂
Management reseves
project sponsor