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Risk Calculation

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shailesh wagh
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Suppose the contract contains a penalty clause of $40,000 per month for a late delivery of THE  SYSTEM.  There is general agreement among the technical team that they have a 50% probability of being late by one month, a 10% probability of being late by two months and a 5% probability of being late by three months.  What is your risk exposure?

scheduled delivery is after 24 month and 3 month for beta testing ..(info if needed)

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Jaga deesan
User offline. Last seen 22 weeks 2 days ago. Offline
Joined: 11 Nov 2018
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Dear Shailesh Wagh,

For simple and clear understanding of Project Risk Management in 20 minutes, please may view the YouTube video given in the below link

https://youtu.be/1MjY-mchvZY

Regards,

R. Jagadeesan

Rafael Davila
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Joined: 1 Mar 2004
Posts: 4723

This problem as presented is based on a single dominant chain. While it looks like both methods can give the same result it is not necessarily valid for the common case where more than a single chain occurs. In order to avoid the Flaw of Averages and falling into the Merge Bias issue it is better to use Monte Carlo methods.