Quantitative Decision Making and Risk Management

CS3300Fall 2015

Review

Critical Path

Scope

Staffing Plan

Activity-Based Costing

Making Decisions

Is this decision the right one. Quantitative techniques can HELP with the

process Decision Trees help with multistage or

sequential problems.

Tree Syntax

Decisionpoint

Course of action 2

Course of action 1

Chanceevent

Branch probability

Branch probability

Branch probability

Draw the Decision Tree

RULE 1: The net value at the end of a branch equals the sum of the costs and benefits along the tree from the first decision event to the end of the branch in question.

RULE 2: Trees are evaluated in reverse order from the sequence of events. If evaluating from right to left, a chance event where 2 or more branches converge, the expected value is the sum of the net value for each branch times the probability of that branch.

Draw the Tree

Rule 3: At each decision point, select the expected value which best meets the objective from among the expected values. For minimization, pick smallest value, for maximizing pick the largest value.

Example Situation

You have the option of taking an income tax prep course. If you attend the course, it costs $35. The course claims that 75% of the students save an average of $60 on their taxes. The course also says 20% of the students save $35, and 5% find they save nothing. Should you take the course?

Take theCourse??

No (no cost, no benefit)EV = 0

Yes, -35

Save 60 (60- 35)*.75 = 18.75

Save 35

P=.75

P=.20

Save 0

(35 -35) * .2 = 0

(0 – 35) * ,05 = -1.75

EV = 18.75 + 0 – 1.75 = 17

P=.05

Decision Matrix

Need to choose an option from a list. Need team members buy-in and a way to show upper management how you arrived at a decision.

Matrix Step 1: Generate a list of choices Step 2: Generate criteria for selection Step 3: Assign a weight to criteria based on

priority Step 4: Assign a value to each choice/criteria

intersection that shows how well it is supported

Step 5: Multiply number by weight of criteria Step 6: Sum total values for each column and

choose maximum

Example

Want to buy a new laptop

Alienware Mac

Weight (3) 3 / 9 5 / 15

Screen Quality (2) 3 / 6 5 / 10

Compile Speed (5) 5 / 25 3 / 15

Graphics Card (5) 5 / 25 3 / 15

Sum 65 55

exercise

What should the target language be for a T-square clone.

Risk Management

Risk Assessment – what are risks and potential impact

Risk Control – how will we resolve the risk

A measure of the likelihood and loss of an unsatisfactory outcome affecting the software project, process or product.

Risk in itself is not bad; risk is essential to progress, and failure is often a key part of learning. But we must learn to balance the possible negative consequences of risk against the potential benefits of its associated opportunity. (Van Scoy, 1992)

If you don’t actively attack the risks, they will actively attack you. (Tom Gilb)

Software Risk

Project Risk – resource constraints, external interfaces, supplier relationships, contract restrictions.

Process Risk – planning, staffing, tracking, quality assurance, configuration management, requirements, etc.

• Product Risk – requirements stability, performance, complexity, test specs.

Risk Identification

What is risk? Probability of occurrence Impact of risk Exposure (probability * cost) or qualitative (see

next graphic)

Software Engineering Institute paper on Risk Management

Mitigation Strategies

Acceptance Avoidance Protection Reduction Research Reserves Transfer

Taxonomy Analysis of Our Project