To monitor and control variance or risk, the variable factors, that are likely to influence future behavior or results, are first segregated
This segregation and data pruning is done to narrow the number of variables to a few relevant predictors based on which the risk response model is formulated on the basis of variance observed and the risk cause identified.
Such variance based prediction models may be based on a simple linear equation or a complex neural network.
This model is validated or even revised, periodically based on its Time Cycle Module, which could be one week for projects and once a day or hour for price movements.
Predictive analytics used for managing risk in TCM is used in the field of marketing, CRM, IT security, engineering, meteorology, and traffic planning.
Predictive analytics can be complex based on statistical modeling or only checklist driven, both based on user experience
In either case the predictive analyst must have both user experience and insider knowledge of the vertical
In both cases the model uses the same core principles of breaking complex variables into simple linear equations, and measuring the mean deviation, investigating the risk cause and planning the risk response
For example in insurance a customer’s, gender, age, occupation, education, hobbies, and driving record are the relevant predictors that would correctly predict the risk and the value at risk VaR in any insurance policy
Product Quality : A fizzy drink blended with a salt that is mildly
pungent and tickles (irritates) the skin at the
tongue tip for a few minutes. A matching
promotional campaign that creates the feel
Project Cost : Launch cost USD 45 million
Project Time : To kill point in 20 weeks
Risk : Insignificant market response
Complex operational Risk with high Risk impact
Insignificant market response is a Risk threatening both the scope and the quality constraint of the Project. If the market response is insignificant, both the product and the project would have failed. It is the highest category of Risk in its domain equivalent to a market crash, a grid collapse or a total loss accident claim.
Insignificant market response is an apparently non-quantify-able risk. It has no direct relation to the variables or the inputs to the project. In the next issue Ba32 in the coming week we will see how this risk is demystified and measured, and how the Risk causes are investigated .
The Project Management Time Cycle – Vol. I TIME CYCLE MODULE: From concept to feasibility ISBN 1440493332 available at Amazon Economy to Ecology Our goal is to help promote clean, safe and better practices in economy and ecology worldwide. Balanced, efficient and a little more sustainable. Kindle Blog Ecothrust ASIN: B0029ZAUAY For any queries mail to [email_address]