Scoring Schemes for Prioritising Project Risks

 

Risk Doctor Briefing

SERIES ARTICLE

Dr David Hillson, PMI Fellow, HonFAPM, FIRM

The Risk Doctor Partnership

United Kingdom

 


 

Several leading project risk management standards and guidelines suggest that individual risks can be ranked using a risk scoring scheme that represents a combination of probability and impact, using the following definitions:

The Risk Score for each risk is produced by multiplying P x I, then this score is used to rank the risks. A risk with medium probability and high impact has a Risk Score of 0.5 x 0.4 = 0.20. The Risk Score for a low probability/very high impact risk is 0.3 x 0.8 = 0.24. So the second risk ranks higher than the first.

But have you ever wondered where these numbers come from? This particular risk scoring scheme was developed by a small group of risk consultants in the mid-1990s to bring some consistency to our practice. The numbers were derived empirically after some trial and error, but the thinking was as follows:

  • Both sets of scales are non-dimensional numbers, and do not have any units. So, in the probability scale, for example, 0.1 does not mean 10% or 1:10, it is just a numerical indicator of the VLO probability rating. Similarly, 0.8 for impact does not “mean” anything, it is just a number referring to a VHI impact rating.
  • This means that you can’t multiply the P score and the I score to get a P-I Score that can be converted to days or dollars or anything else. The product is simply a rating scale that takes account of two dimensions to give a single common index that allows risks to be ranked against each other.

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How to cite this paper: Hillson, D. (2019).  Scoring Schemes for Prioritising Project Risk, Risk Doctor Briefing; PM World Journal, Volume VIII, Issue IV (May).  Available online at https://pmworldlibrary.net/wp-content/uploads/2019/05/pmwj81-May2019-Hillson-scoring-schemes-for-prioritising-project-risk.pdf

 


 

About the Author


Dr David Hillson HonFAPM PMI-Fellow CFIRM CMgr FCMI

The Risk Doctor
United Kingdom

 

 

Known globally as The Risk Doctor, David Hillson leads The Risk Doctor Partnership (www.risk-doctor.com), a global consultancy offering specialist risk services across the world.

David has a reputation as an excellent speaker and presenter on risk. His talks blend thought-leadership with practical application, presented in an accessible style that combines clarity with humour, guided by the Risk Doctor motto: “Understand profoundly so you can explain simply”.

He also writes widely on risk, with eleven major books, and over 100 professional papers. He publishes a regular Risk Doctor Briefing blog in seven languages to 10,000 followers, and has over 4000 subscribers to the RiskDoctorVideo YouTube channel (www.youtube.com/RiskDoctorVideo).

David has advised leaders and organisations in over fifty countries around the world on how to create value from risk based on a mature approach to risk management, and his wisdom and insights are in high demand. He has also received many awards for his ground-breaking work in risk management over several decades.

To see other works previously published in the PM World Journal by Dr David Hillson, visit his author showcase at http://pmworldlibrary.net/authors/dr-david-hillson/