The weighted cost impact of a risk is, in simple terms, the probability of that risk occurring multiplied by the cost impact of that risk should it occur. For instance, if there is a 10% chance that the project manager leaves the company part-way through the project, and the cost impact of bringing a new project manager up to speed is $5,000, then the weighted cost impact is $500.

Understanding the weighted cost impact of a risk is crucial as it is used to allocate funds or reserves in the project to cover the likelihood of some of the project risks occurring.

Depending on your risk policy, the weighted cost impact may take overall severity into consideration. If your risk policy incorporates severity into the weighted cost impact, then the weighted cost impact is now the probability of the risk occurring multiplied by the cost impact of the risk should it occur, multiplied by the overall severity of the risk.

Risk severity typically ranges from close to 100% (for significant or critical risks) down to 20% or less for smaller risks that do not impact performance or milestones visible to the end customer. Overall severity acts as a modifying factor reducing the net weighted impact of a whole series of risks, as seen in the context of a competitive proposal. Individual or larger risks have a higher severity, so there is less or no reduction in the weighted cost impact, whereas smaller individual risks within larger groups of risks have a lower severity because each risk, on its own, won't make much difference to the overall program delivery cost.

The decision whether or not to consider overall severity is determined during the implementation with your consultant and pre-set on the risk policy assigned to your project.

Under certain conditions, such as during the release or completion of mitigation plan tasks, the target weighted cost impact is used in place of the initially assessed weighted cost impact for the risk. This is because a response to mitigate or control the risk is designed to reduce the cost impact or probability of the risk occurring, i.e., to reduce the weighted cost impact. This occurs either:

• When a risk mitigation plan is released and the user selects the option to adopt the target weighted cost impact as the weighted cost impact.
• When individual mitigation plan tasks are completed or marked as "done," and target probability or cost impacts were maintained for for specific mitigation plan tasks
• When the mitigation plan is completed (i.e., all the tasks are marked as done).

Please note that changes to the assessed probability, cost, schedule or performance impact in the ASSESSMENT tab after adopting the target weighted cost impact in this way will reset the weighted cost impact to the probability multiplied by the cost (optionally also multiplied by severity) again.