6.5  Estimate the probability of risk

Having identified the material risks and assessed the variety of potential consequences, it is then necessary to estimate the probability of each of the consequences occurring. When assessing a particular risk, the procurement team should consider whether probability is expected to change over time. For example, the probability of operating cost over runs may typically change over the term of the project, due to the reduced ability to forecast accurately over the long term. There are various risk valuation techniques that can be used to provide probability estimates. These range from simple techniques that provide a subjective estimate of probability, to more advanced techniques that produce weighted probabilities for specific risks based on given confidence intervals, and single comprehensive risk estimates for all project risks using multivariable statistical techniques.

Some of these techniques are outlined below, with guidance on which method may be suitable for each risk.