The Risk Variable in Value Optimisation

“Value is grounded in reality.” Stewart emphasises that value is not defined by price but rather in utility. An innovation may have a set price, but its utility depends on the perspective of the owners. The absolute cost of a product may be fixed; but its value may differ depending on the perception of the end users.

Stewart's book 'Value optimization for Project and Performance Management' looks at value from the project point of view.  He defines value in four variables: time, cost, performance and risk. The time-cost-performance triangle is the standard dimension in measuring success in project management, but Stewart adds the risk variable in his value function.  

 or simply...

Risk should be incorporated in measuring value; the impact of uncertainty to achieving project objectives must be considered. This is because if the management of risk is neglected, it can damage the overall value of the project.

"Maximising the relationship between these [four] elements is important to satisfying the customer and optimising valure"

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Source:
STEWART, R. B. 2010. Value optimization for project and performance management, Hoboken, N.J., Wiley.