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.

Translation Please!

I found this definition in an interesting article about programme risk management... it would be very helpful if I could understand this portion fully. My maths are a bit rusty, I understand the first portion a bit, but need confirmation for the meaning of (2).

Any help would be appreciated. :)

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The article:

KWAN, T. W. & LEUNG, H. K. N. Measuring Risks within a Program Consisting of Multiple Interdependent Projects. 2009. IEEE, 1-7.

Measuring an Organisation's Risk Appetite

One of the questions I need to answer in my dissertation is: What is UNDP's risk appetite?

Initial reading from Gambir Bhatta's "Don't do something, stand there! Revisiting the Issue of Risks in Innovation in the Public Sector":

Each organization’s appetite or tolerance for risks is unique and will vary according to any one (or combination) of several variables but may be conceived of as in: the extent of its legal mandate including any fuzzy boundaries around it; the intractability of the problem it is dealing with; the strategy(ies) it pursues to meet the mandate; its degree of access to relevant information; its organizational culture; the management style of its leaders although it could be argued that over time, this will tend to settle at a level that is determined by the organizational culture rather than the leaders’ styles); the responsible minister’s own risk appetite; and the organization’s age.

Notationally, this could be framed as:

Departmental Risk Appetite

{RAd = f(M1, M2, S, Ia, OC, MS, MRAt-1, OA, e}

where M1 is organizational mandate, M2 is degree of problem intractability, S is strategy, Ia is degree of access to relevant information, OC is organizational culture, MS is manager’s style, MRAt-1 is minister’s risk appetite (which itself is also a function of the collective risk appetite of government, and of the perception of severity of risk but lagged because it generally takes time to diffuse to departmental level), OA is age of organization, and e is the error term.

Link: http://citeseerx.ist.psu.edu/viewdoc/download?doi=10.1.1.174.4005&rep=rep1&type=pdf.