What is planned and unplanned risk?

What is planned and unplanned risk?

As Rumsfeld is often quoted, ‘known unknowns and unknowns unknowns’.

Planned risk is almost always represented as risk of items in the bill of quantities which are known scope, and the risk or variance around the quantity, rate or cost drivers. Planned risk will always contribute to the risk output.

Unplanned risk on the other hand has a probability of not occurring – for example, risk of an extreme weather event beyond weather averages. Unplanned risk will only contribute to the risk output when the risk occurs in the simulation. If a model is simulated 10,000 times and a risk has a 10% probability of occurring, the risk will contribute to the risk output only 1,000 times. Unplanned risk influences tail risk more so than planned risk.

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