What is a Risk Budget with PRINCE2? 

What is a Risk Budget?

A Risk Budget is a sum of money that is put aside just to deal with specific responses to threats or opportunities and it cannot be used for anything else. Certain responses to Risk will require certain actions to be done that cost money; this will be budgeted in the Risk Budget.

How do you think you can calculate a value for the Risk Budget?

There is a certain process that needs to be followed in order to calculate a value for the Risk Budget.

You cannot just pull a value out of thin air. Each risk needs to be analyzed and a value assigned to the costs of the response and the likelihood.

Using the likelihood and cost of Response Information for all risks, it is possible to calculate a value for the risk budget.

What can the Risk Budget be used for?

The PRINCE2 manual reminds us that this budget is used for responding to risks that occur.

It should not be used to fund extra requirements that are introduced in the project or cover the cost of any delays. The Risk Budget has nothing to do with the Change Budget, so it should not be raided if the Change Budget is empty.

The Risk Budget is set at the start of the project but new risks can be detected during the project, so it’s a good idea to increase the original Risk Budget to cover extra risks that may be identified during the project.

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