Accurate representation of risk is critical to the defense and traceability of any risk management strategy. Risk is generally acknowledged as probability times severity or impact. In one dimension, such as cost, risk quantification is straightforward. Risk, in that case, equals probability times cost. However, project risks often encompass multiple dimensions. For example, one risk may adversely affect the project schedule, cost, safety, etc.
Current risk analysis methods are unable to characterize risk in multiple dimensions. For example, what is the risk score for an event that has a probability of x percent, the cost impact of y dollars, and the schedule impact of z months? Currently, no single metric exists to characterize this risk across its multiple dimensions. Having risk exposure in multiple dimensions is notionally more risky than exposure in a single dimension, but by how much? And when does risk exposure in a single dimension become more critical than risk exposure in multiple dimensions.
Further, accurate comparison of one risk to another is very difficult once multiple dimensions are introduced. With multiple dimensions it is difficult to know whether a high-cost-low-schedule-event is absolutely more risky than a medium-cost-medium-schedule-event as an example.
Multidimensional Risk (MRISK) represents a leap forward in risk analysis because it provides a multivariate approach for characterizing risk across multiple dimensions while accounting for the interdependencies of risk dimensions. MRISK uses a distance algorithm to map risk severity from multiple dimensions into one dimension. Further, MRISK is able to collapse an infinite number of dimensions into one while still accounting for the relationship of one dimension to another. For instance, a cost overrun is often linked to a schedule overrun. MRISK is able to account for this relationship in its severity calculation. This makes risk comparison straightforward, defendable, traceable, and more objective.