Question

What constitutes a micro economic risk assessment ?

Answer 1

Microeconomics is a branch of economics that studies the behavior of individuals and firms in making decisions regarding the allocation of scarce resources (time, money, facilities, and talent) and the interactions between individuals (inside and outside the firm) and firms themselves. Cost and schedule growth for programs is created by unrealistic technical performance expectations, unrealistic cost and schedule estimates, inadequate risk assessments, unanticipated technical issues, and poorly performed and ineffective risk management, all contributing to program technical and programmatic shortfalls.Cost and schedule growth for software development programs is created by unrealistic technical performance expectations, unrealistic cost and schedule estimates, inadequate risk assessments, unanticipated technical issues, and poorly performed and ineffective risk management, all contributing to program technical and programmatic shortfalls.

Risk can be the potential consequence of a specific outcome that affects the system’s ability to meet cost, schedule, and/or technical objectives. Risk has three primary components:

• Probability of the activity or event occurring or not occurring, described by a Probability Distribution Function.
• Consequence or effect resulting from the activity or event occurring or not occurring, described by a Probability Distribution Function.
• Root Cause (condition and activity) of a future outcome, which when reduced or eliminated, will prevent the occurrence, non‒occurrence, or recurrence of the cause of the risk.

There are three micro economic risk assessment categories that must be identified and handled. Each of the categories operates in the presence of uncertainty and requires that estimates be made about the probability, consequence of the resulting risk. and of course, the Root Cause determined before any corrective or preventive action can be taken:

• Technical ‒ risks that may prevent the end item from performing as intended or not meeting performance expectations. Measures of Effectiveness, Measures of Performance, Technical Performance Measures, and Key Performance Parameters describe the measures of these expectations.
• Programmatic ‒ risks that affect the cost and schedule measures of the program. The programmatic risks are within the control or influence of the Program Management or Program Executive Office, through managerial actions applied to the work activities contained in the Integrated Master Schedule.
• Business ‒ risks that originate outside the program office or are not within the control or influence of the Program Manager or Program Executive Office.

This assessment relies on worldwide network and the expertise deriving from its experience in underwriting risks, investigating companies and managing receivables.