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Risk and Risk Management (Theory and Practice). Todd Little and Chris Matts. “It’s tough to make predictions, especially about the future.” Yogi Berra, Niels Bohr. Exercise What are the types of risk?. How do “Risky Businesses” work. Financial Markets.

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Risk and Risk Management (Theory and Practice)


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  1. Risk and Risk Management (Theory and Practice) Todd Little and Chris Matts “It’s tough to make predictions, especially about the future.”Yogi Berra, Niels Bohr

  2. Exercise What are the types of risk?

  3. How do “Risky Businesses” work

  4. Financial Markets A severe depression like that of 1920-21 is outside the range of probability. Harvard Economic Society, Weekly Letter, November 16, 1929.

  5. New Product Development I think there is a world market for about five computers. Thomas J. Watson, chairman of IBM, 1943.

  6. War They couldn't hit an elephant at this dist… General John B. Sedgwick, Union Army Civil War officer's last words, uttered during the Battle of Spotsylvania, 1864

  7. Oil & Gas Exploration 90-80% Failure

  8. Which Risks Are Important

  9. Well 2 Well 1 Oil and Gas Drilling Surface Seismic reflection A Reservoir B Oil Water

  10. Oil and Gas Drilling Well 2 Well 1 Surface Seismic reflection A Reservoir B Oil Water

  11. Geosteering for Uncertainty Well 2 Well 1 Surface A Planned Reservoir B Actual Reservoir Well 2’ Figure 2

  12. Hurricane Rita

  13. Getting Better

  14. Movies 78% of Films Lose Money 6% of films make 80% of profit

  15. Books 300,000 in 2004, <25% sold 100 copies

  16. Venture Capital

  17. Categories of risk Business Case Failure Delivery Failure Collateral Damage

  18. Delivery Challenges/Failures Standish Group 2006, reported by CEO Jim Johnson, CIO.com, ‘How to Spot a Failing Project’

  19. Business Case Failure

  20. Collateral Damage 11 hour wait time 20-30 deaths

  21. Wrong Priorities

  22. Collateral Damage An effective roll-back strategy

  23. Delivery Failure results in Collateral Damage

  24. I’m beginning to think it wasn’t such a good idea to turn off those unit tests

  25. Business Case Failure

  26. Features and Functions Always or Often Used: 20% Always 7% Often 13% Never Used 45% Sometimes 16% Rarely Used 19% Never or Rarely Used: 64% Standish Group Study, reported by CEO Jim Johnson, XP2002

  27. Purpose Alignment Model High Partner Differentiating Market Differentiating Who Cares? Parity Low High Low Mission Critical Purpose Does Not Equal Priority

  28. Graphically - Before High Project Tracking Document Mgmt Document Edit Document Library Search EDGAR Integration Market Differentiating Low High Low Mission Critical

  29. Graphically - Before High Portal Document Edit Market Differentiating Project Tracking Document Mgmt Document Library Search EDGAR Integration Low High Low Mission Critical Result: Better product in half the time and 60% of the original cost

  30. Example: Apple High New Product Design User Experience Content Distribution ATT Market Differentiating Other Software MS Office Intel Hardware Peripherals Low High Low Mission Critical

  31. Considerations

  32. Delivery Failure

  33. When will we get the requirements? All in good time, my little pretty, all in good time But I guess it doesn't matter anyway Just give me your estimates by this afternoon Not so fast! Not so fast! ... I'll have to give the matter a little thought. Go away and come back tomorrow No, we need something today! Ok then, it will take 2 years. No, we need it sooner. Doesn't anybody believe me? I already promised the customer it will be out in 6 months You're a very bad man! Managing the Coming Storm Inside the Tornado Project Kickoff Team Unity

  34. I may not come out alive, but I'm goin' in there! The Great and Powerful Oz has got matters well in hand. My! People come and go so quickly here! "Hee hee hee ha ha! Going so soon? I wouldn't hear of it! Why, my little party's just beginning! We’re not in Kansas Anymore Developer Hero Reorg Testing

  35. IEEE Software, May/June 2006

  36. Data from LGC

  37. CDF Distribution Curve (LGC)

  38. How does Estimation Accuracy Improve Over Time? (Boehm) 2 0.5

  39. Landmark Cone of Uncertainty

  40. Another look?

  41. But is Uncertainty Really Reduced? “Take away an ordinary person’s illusions and you take away happiness at the same time.” Henrik Ibsen--Villanden

  42. Cumulative Distribution (CDF) Curve

  43. Remaining Uncertainty

  44. The Pipe of Uncertainty 2 0.5

  45. Why is Software Late?

  46. From the home office in Duncan, Oklahoma Dubai, UAE Top Ten reasons why we are late in 2008 Top 10 List Top 10 List

  47. Top Ten reasons why we are late in 2008 10: Requirements, what Requirements? What you want, baby I got it R-E-Q-U-I-R-E Find out what it means to me