# DAVION

## SYSTEMS

# Cost Impact Scale

A cost impact scale converts the expected cost impact of a risk (e.g. this risk will result in additional expenditures of $10,000 if it occurs) into a simple numerical scale value. A numerical scale value is required if you want to display the risk on a risk matrix.

A cost impact scale is defined in terms of a series of cost values. These values are entered via the Cost Impact Scale form, which is accessed via the Risk Impacts form.

### Scale Size

The number of levels in your scale is determined by the risk matrix size.

### Constructing a Scale

When constructing a scale, start at the upper and lower limits of the scale.

*Upper Limit*

Think of the smallest cost overrun that would be considered catastrophic. For example, if your project has a million-dollar budget, a 10 million dollar overrun would presumably be catastrophic. However, would 1 million be catastrophic? $500,000? $250,000? The smallest amount that would be considered catastrophic becomes the highest level on your scale. If this amount is, say, $250,000 then your top level would be ‘cost increase of $250,000 or more’.

*Lower Limit*

Think of the largest amount that can be considered as acceptable day-to-day variation. For example, in a million-dollar project a cost overrun of $10 is probably quite insignificant. How about $100? $1,000? $10,000? Estimate the largest amount which can be considered as acceptable day-to-day variation, and call this level 1. If this amount is $5,000, for example, then level 1 in your cost scale would be ‘cost increase of less than $5,000’.

*Intermediate Points*

Once you have set the upper and lower limits for your scale, you can fill in the intermediate values. For example, if you are developing a 5-level scale and levels 1 and 5 are $5,000 and $250,000 respectively, you might set the intermediate values at $25,000 and $100,000. Your scale then becomes:

- Level 1: less than $5,000
- Level 2: $5,000 or more but less than $25,000
- Level 3: $25,000 or more but less than $100,000
- Level 4: $100,000 or more but less than $250,000
- Level 5: $250,000 or more

### Units

The units in which the data is entered can be in ones, thousands or millions. This is a typing convenience only, and does not affect the actual values which are stored.

### Currency

The scale will normally be in your base currency. However, you can choose to express the scale in any other currency.

### Scale Changes

You can change the scale at any time. Mandrel will automatically change any existing cost impact assessments to comply with the new scale.