Please update your browser
We have detected that you are using an outdated browser that will prevent you from using
certain features. An update is required to improve your browsing experience.
-
Risks & Assumptions
Risks & Assumptions
An assumption is an idea that is accepted to be true without certainty. Until we validate assumptions, they also represent a risk.
Risks are future events that have a likelihood of occurrence and an anticipated impact. Risks can be opportunities (positive) or threats (negative). Frequently we focus on the negative and fail to consider the upside.
Risks can be described quantitatively or qualitatively. Likelihood can be expressed as a probability or with descriptive modifiers. For example, “the chance of rain is 75%” or “it is likely to rain today.” Impacts can be measured numerically in days or dollars, or qualitatively (e.g., late, over-budget).
Project management has frameworks for managing assumptions and risks. Assumptions are documented in the assumptions log, tracked, validated, and the outcome communicated. Risks are recorded in the risk register, assessed, addressed, monitored, and responded to. Adhering to these practices will ensure better project outcomes.
Knowns & Unknowns
Most people struggle to define assumptions without using the word “assume.”
An episode from the Odd Couple TV show offers an amusing definition of assUme. Defense Secretary Donald Rumsfeld’s known-unknowns press conference is another example.
A matrix of what we know and don’t know provides insight into assumptions and risks:
KNOWN UNKNOWN
KNOWN I know that! Assumptions & Risks
UNKNOWN Bias. Blindspots Pure risk. Unexpected.
• Known-Knowns are things we know with certainty. We can count on them occurring. They are neither risks nor assumptions.
• Known-Unknowns can either be assumptions or risks.
• Unknown-Knowns are things we did not realize we knew. These are blind spots.
• Unknown-Unknowns are outside our realm of knowledge and represent pure risk.
Invalidated assumptions are known-unknowns and should be documented in both the assumptions log and risk register. These risks may also be included in the contingency risk reserves. Expected monetary value or similar valuation techniques can be used to estimate the time or cost impact of these risks.
The impact of the unknown-unknowns is incorporated into the management reserves or buffer. Buffers are commonly percentages applied to the estimated cost or time. For example, the cost of a home renovation project may exceed the original budget by 10-20%; or take an additional 4-6 weeks to complete
