Meaning of risk cube
The Risk Cube method is the leading Risk Management methodology. It involves assignemnt of a Likelihood (or probability) of failure, Pf, and a Consequence of Failure (Cf). In one variation, these two values are simple ordinal (hopefully ratio) values, often from 0 or 1 to 5 (or 10). The two values are multiplied, and the multiplicand, variously labeled but herein called the Expected Value of Failure (Ef), is used as an assessment of the risk's impact or relative importance. In this version, the risks are plotted on a square with dimensions of the maximum allowable values usibng green, yellow and red subsquares, coded by values of the products. This plot conveys which risks are the most worrisome, with lesser risks toward the lower left (green) corner and worse risks toward the upper right (red) corner. In more involved versions, Pf and Cf are a probability and a cost or schedule value, respectively, and Ef is then the true expected value. The more advanced form of the Risk Cube method lends itself to rollups, Monte Carlo analysis and yields an s-curve, or PDF, of outcomes. see Pf, Qf, Ef, Cf, and Risk Management as well as ordinal and ratio measurements.
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