Risk Assessment

You are assigned a new project.

You will be the project manager and your team will be assigned soon.

The project is a difficult $25 million interchange project that needs to be completed by October 2012 for the opening of a new Wal-Mart distribution center.

There is a 20% chance that contaminated soil may be found costing $1,500,000 to clean up and cause a four week schedule delay.

There is a 40% chance that the $800,000 gas station parcel on the corner will go to condemnation.

There is a 50% chance that a condemnation ruling will raise the cost of the parcel by 10% and 10% chance that it will raise the cost by 40%.

A delay to the project will cost $10,000 per working day.

There is an opportunity to contract out a portion of design work budgeted at $400,000 but the consultant requires $700,000 but there is a 90% chance the consultant will deliver the work early saving 45 working days on the project schedule.

There is a 10% chance that high ground water will be encountered during excavation and require pumping ($20,000). If the pumped water is contaminated there is risk interaction between the two and will cost $500,000.

What should your contingency budget be for this project?

Should you contract out the work?

What should be included on your risk register?

The above problem was taken from a class I taught on Risk Management.

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