Managing the Risk, Managing the Estimates

There lies the key challenge. How do you manage the uncertainty that is naturally involved with the estimating process? Since these estimates form the foundation for the project schedule and the project budget, we must implement techniques and approaches that allow us to properly manage this risk and the expectations of our stakeholders.

While this subject of estimating and risk could easily slip into a review of statistics, probability, standard deviations, skewed distributions, and Monte Carlo analysis, we will not go there. In many real-world environments, these advanced concepts and techniques are not utilized to estimate work and to manage the associated risk, and these topics would be outside the scope of this book. Our focus will be understanding the impact that estimating the work has on our overall risk management approach and what we can do to minimize the those risks.

Estimating the work is a fundamental risk analysis step. Not only do you estimate work efforts, but you also identify the assumptions that support the estimate and the key risk factors that may impact the accuracy of those estimates. These key outputs are depicted in Figure 7.3.

Figure 7.3. Estimates are key inputs for scheduling, budgeting, and risk management.