Probability and statistics are a core business process for decision making in the presence uncertainty. Uncertainty comes in two types - Irreducible and Reducible.
Making decisions in the presence of these two types of uncertainty requires making estimates about outcomes in the presence of the risks created by the uncertainties.
All decisions involve uncertainty, risk, and trade-offs. This is an immutable principle of all business and technical processes in the presence of uncertainty.
Successful management of software project cost within the limited budget is an important concern in any business. Lack of information and reliable tools that support estimating process make it difficult to initiate estimating report during early project planning stages. To control the cost to an acceptable level, requires appropriate and accurate measurement of various project related variables and the understanding of the magnitude of their effects.
The importance of early estimating to those funding the project or those providing capital to fund products cannot be over emphasized.
Making cost estimates with Bayesian decision processes is a well developed discipline. Here's a recent paper from a colleague in NASA, Christian Smart
The risk created by these uncertainties are always present. If unaddressed, our project is at risk of failure. To performance this Bayesian analysis of program performance probabilities, there are several tools. Here's one example
In the end risk management is about estimating the impacts of reducible and irreducible uncertainty.
As Tim Lister says - Risk Management is How Adults Manage Projects
Some More Resources of Bayesian Decision Making
- The use of Bayes and causal modelling in decision making, uncertainty and risk, Norman Fenton and Martin Neil
- Decision support software for probabilistic risk assessment using Bayesian networks, Norman Fenton and Martin Neil
- Software Project Level Estimation Model Framework based on Bayesian Belief Networks, Hao Wang Siemens Ltd. China CT SE Beijing, China, Fei Peng Siemens Ltd. China CT SE Beijing, China, Chao Zhang Siemens Ltd. China CT SE Beijing, China, Andrej Pietschker Siemens AG CT SE 1 Munich, Germany
- Decision Making in the Presence of Uncertainty, Milos Hauskrecht
- Managerial Decision Making Under Risk and Uncertainty, Ari Riabacke, IAENG International Journal of Computer Science, 32:4, IJCS_32_4_12
- Decision Making Under Uncertainty Think Clearly – Act Decisively – Feel Confident Think clearly, act decisively and feel confident – Unilever’s story, Sven Roden
- Supporting Early Decision-Making in the Presence of Uncertainty, Jennifer Horkoff , Rick Salay, Marsha Chechik , and Alessio Di Sandro
- Risk-informed decision-making in the presence of epistemic uncertainty, Didier Dubois, Dominique Guyonnet, International Journal of General Systems, Taylor & Francis, 2011, 40 (2), pp.145-167.