Individual cost items can be regarded as planned expenditures or activities, or they can be regarded as provisional, or possible, expenditures or activities. The latter are called risks, i.e. expenditures that you may have to make or activities you may have to undertake, but not necessarily.
Any cost item may be converted into a provisional cost item, or risk, by assigning it a probability of less than 100%.
Scope uncertainty can be included in a project or program by the use of such provisional cost items.
In addition to probability, risks are defined in terms of impacts. An impact is the effect on a particular aspect of your project or program that a risk would have if it occurred. For example, you can have cost impacts, safety impacts, schedule impacts, and so on. You can have up to 16 different impacts.
Impacts within Mandrel can be cost-only, in which case they are expressed purely in terms of cost, or they can be non-cost, in which case they are expressed in terms other than cost. However, non-cost impacts can have costs associated with them.
Mandrel provides a cost-only impact called Overall Cost, which is based on the overall cost of any cost item. The other 15 impacts are user-definable an can be cost-only or non-cost.
Risk Breakdown Structure
Since risks are treated as cost items within the cost breakdown structure, it is possible to build up a hierarchical structure of risks. If Mandrel is used solely for risk management purposes, the resulting structure is often known as a risk breakdown structure.
By definition, a risk has a probability of less than 100% and therefore may not occur. Consequently if you try to estimate risk exposure, i.e. the cost impact of all risks combined, by simply adding up their individual costs, you are likely to end up with a gross over-estimate of the required risk cost provision.
Mandrel uses the concept of weighted cost, i.e. the cost effect of a risk multiplied by its probability, to estimate risk exposure.
You can show the risk exposure for a project by generating a weighted cost report .
A risk may not last for the entire lifetime of a project or program. For example, a risk that the client may not accept a particular design feature will cease to be a risk once the design has been agreed upon.
Risks can have closure criteria established, so that the set of circumstances under which a risk may be closed can be defined in advance. Closure criteria are entered via the Risk page of the Cost Data Entry form.