Software Project Management - Old Questions

5. Explain the use of decision tree in Risk Evaluation.

Answered by Anonymous

Decision trees allow project managers to distinguish between decisions where we have control and chance events that may or may not happen. It takes account of the costs and rewards of decision options as well as the probabilities and impacts of associated risks. Structured analysis using “rolling forward” and “folding back” allows the best decision option to be taken based on calculation of Expected Monetary Value, although this may be influenced by the risk appetite of the organization. The decision tree technique offers a powerful way of describing, understanding and analyzing uncertainty, and can be a valuable part of the toolkit for any project manager who needs to make decisions where the outcome is uncertain.