Subtitles of the Movie

In this movie we'll move on to cover the risk probability and impact matrix. The PMBOK Guide does a great job of providing you with an example within the chapter on risk and we'll look at another basic example here in this movie. Remember that using the previous technique, risk probability and impact assessment, our experts assigned a risk rating to each risk on a probability and impact level. Let's follow an example throughout this movie to make sure it's clear. In the example that we'll be looking at, the risk management team is working on a project that involves laying substitute grass across 50,000 square feet of land. The risk management team has an identified a major risk, which is the shortage of product from the vendor and the product in this example is the substitute grass. This new form of grass has been in great demand, causing a production strain on the vendor, which has resulted in this risk. Using the probability and impact definitions that we discussed in the previous movie, our experts participating in risk assessment gave this risk the following risk rating: a probability rating of .8 and an impact rating of .48. When we use a numeric scale to express these values, they're typically assigned using a cardinal scale and if you aren't familiar with a cardinal scale, these are expressed within values from zero to one. Notice that this is how the values of our example have been assigned. We'll use these values within our lookup table, which is the probability and impact matrix, to determine whether this risk is considered to be a high risk, a moderate risk or a low risk. With this in the back of our minds, let's take a look at a probability and impact matrix and just a refresher that according to the PMBOK Guide, the organization defines the values within the matrix. Remember that the matrix is included within the risk management plan. Although I mentioned earlier within this section that if one wasn't included, we'll need to take care of that within this process since we can't proceed without it. On your screen you now have a sample probability and impact matrix, which coincides with our grass project. What this matrix does is combine probability and impact into one overall rating. This is different from the rating assigned using the previous technique and the rating that is assigned using the probability and impact matrix tool. To avoid confusion, I'll refer to the rating that we'll assign now as a risk score. Within the matrix, you can see that there's a probability rating going down the first column to the left of the chart and the values to the right of that column are impact ratings. Like the PMBOK Guide example, the impact values are color-coded. According to the PMBOK Guide, red signifies a high risk; yellow signifies a moderate risk and green signifies a low risk. But your organization may have a different color classification or perhaps simply identifying the values as high, medium and low and not by color at all. Just know that this form of classification exists. Going back to our grass example, our experts had assigned a risk of the vendor running into a shortage of grass production as a 8 probability and an impact rating of .48. Find where .8 falls within our matrix and now that we've found it, we'll look at the impact rating that was assigned to this risk within that particular row. And again in our example we had an impact rating of .48 assigned. Now follow that row and we see that this falls here and the color shown is red. This makes it a high risk. Another note I'd like to add regarding the probability and impact matrix is that an organization may have a matrix that specifies a rating by project objects and also a separate set of numbers for negative versus positive risk. In the PMBOK Guide example, you'll see a different set of numbers for risks that pose threats versus opportunities. And that wraps up our review of the risk probability and impact matrix.