project risk analysis with risk event and event chain
DESCRIPTION
This presentation show how to perform project risk analysis with uncertainties defined using risk events and event chains. For more information how to perform schedule risk analysis using RiskyProject software please visit Intaver Institute web site: http://www.intaver.com. About Intaver Institute. Intaver Institute Inc. develops project risk management and project risk analysis software. Intaver's flagship product is RiskyProject: project risk management software. RiskyProject integrates with Microsoft Project, Oracle Primavera, other project management software or can run standalone. RiskyProject comes in three configurations: RiskyProject Lite, RiskyProject Professional, and RiskyProject Enterprise.TRANSCRIPT
![Page 1: Project Risk Analysis with Risk Event and Event Chain](https://reader038.vdocuments.site/reader038/viewer/2022110115/548415b0b4af9f18728b48c7/html5/thumbnails/1.jpg)
Risk Event Modeling
Risk event modeling in part of Intaver Institute’s presentations on project risk
management and risk analysis
Intaver Institute Inc.303, 6707, Elbow Drive S.W, Calgary, AB, CanadaTel: +1(403)692-2252Fax: +1(403)459-4533www.intaver.com
![Page 2: Project Risk Analysis with Risk Event and Event Chain](https://reader038.vdocuments.site/reader038/viewer/2022110115/548415b0b4af9f18728b48c7/html5/thumbnails/2.jpg)
The Project Management Problem
04/10/23 2009 Intaver Institute 2
Many projects are unsuccessful! Many projects are unsuccessful!
![Page 3: Project Risk Analysis with Risk Event and Event Chain](https://reader038.vdocuments.site/reader038/viewer/2022110115/548415b0b4af9f18728b48c7/html5/thumbnails/3.jpg)
04/10/23 2009 Intaver Institute 3
The Project Management Problem
![Page 4: Project Risk Analysis with Risk Event and Event Chain](https://reader038.vdocuments.site/reader038/viewer/2022110115/548415b0b4af9f18728b48c7/html5/thumbnails/4.jpg)
04/10/23 2009 Intaver Institute 4
The Project Management Problem
![Page 5: Project Risk Analysis with Risk Event and Event Chain](https://reader038.vdocuments.site/reader038/viewer/2022110115/548415b0b4af9f18728b48c7/html5/thumbnails/5.jpg)
04/10/23 2009 Intaver Institute 5
The Project Management Problem
![Page 6: Project Risk Analysis with Risk Event and Event Chain](https://reader038.vdocuments.site/reader038/viewer/2022110115/548415b0b4af9f18728b48c7/html5/thumbnails/6.jpg)
04/10/23 2009 Intaver Institute 6
The Project Management Problem
![Page 7: Project Risk Analysis with Risk Event and Event Chain](https://reader038.vdocuments.site/reader038/viewer/2022110115/548415b0b4af9f18728b48c7/html5/thumbnails/7.jpg)
Benefits
04/10/23 2009 Intaver Institute 7
![Page 8: Project Risk Analysis with Risk Event and Event Chain](https://reader038.vdocuments.site/reader038/viewer/2022110115/548415b0b4af9f18728b48c7/html5/thumbnails/8.jpg)
Risk Event Modeling Workflow
04/10/23 2009 Intaver Institute 8
![Page 9: Project Risk Analysis with Risk Event and Event Chain](https://reader038.vdocuments.site/reader038/viewer/2022110115/548415b0b4af9f18728b48c7/html5/thumbnails/9.jpg)
Risk Definition
• Risks– Risks are “events” that have a probability of occurring during a project– Risks are identified and assigned to tasks or resources – Define impact of risks by assigning:
• Chance of occurrence• Outcome (e.g. delay, increase in cost)• Result (percentage or fixed value of outcome)
04/10/23 2009 Intaver Institute 9
![Page 10: Project Risk Analysis with Risk Event and Event Chain](https://reader038.vdocuments.site/reader038/viewer/2022110115/548415b0b4af9f18728b48c7/html5/thumbnails/10.jpg)
What is Monte Carlo
Monte Carlo simulation is a mathematical method used in risk analysis. Monte Carlo simulations are used to approximate the distribution of potential results based on probabilistic inputs.
![Page 11: Project Risk Analysis with Risk Event and Event Chain](https://reader038.vdocuments.site/reader038/viewer/2022110115/548415b0b4af9f18728b48c7/html5/thumbnails/11.jpg)
Monte Carlo Simulations
Input Parameters Output Parameters
Calculation
Engine
Critical PathScheduling
Engine
(
)
Task durationcost, finish time,etc.
cost, finish time,etc.
Project duration
![Page 12: Project Risk Analysis with Risk Event and Event Chain](https://reader038.vdocuments.site/reader038/viewer/2022110115/548415b0b4af9f18728b48c7/html5/thumbnails/12.jpg)
Monte Carlo Schedule Analysis
4 5 6321 7 7 82 3 654 1 4 5 632 7
8 9 10 11 12 13 14 15 16
1
2
3
4
5
6
7
Task 1
Task 2Task 3
![Page 13: Project Risk Analysis with Risk Event and Event Chain](https://reader038.vdocuments.site/reader038/viewer/2022110115/548415b0b4af9f18728b48c7/html5/thumbnails/13.jpg)
Two Approaches to Estimating Probabilities
• The relative frequency approach, where probability equals the number of occurrences of specific outcome (or event) divided by the total number of possible outcomes.
• The subjective approach represents an expert’s degree of belief that a particular outcome will occur.
![Page 14: Project Risk Analysis with Risk Event and Event Chain](https://reader038.vdocuments.site/reader038/viewer/2022110115/548415b0b4af9f18728b48c7/html5/thumbnails/14.jpg)
Two Approaches for Defining Uncertainties
• Distribution-based approach • Event-based approach
![Page 15: Project Risk Analysis with Risk Event and Event Chain](https://reader038.vdocuments.site/reader038/viewer/2022110115/548415b0b4af9f18728b48c7/html5/thumbnails/15.jpg)
Which Distribution Should Be Used?
Normal Triangual Uniform
Also useful:
• Lognornal
• Beta
![Page 16: Project Risk Analysis with Risk Event and Event Chain](https://reader038.vdocuments.site/reader038/viewer/2022110115/548415b0b4af9f18728b48c7/html5/thumbnails/16.jpg)
Distribution Fitting
![Page 17: Project Risk Analysis with Risk Event and Event Chain](https://reader038.vdocuments.site/reader038/viewer/2022110115/548415b0b4af9f18728b48c7/html5/thumbnails/17.jpg)
Before Eliciting Judgment You Need to Have:
• A clearly defined problem• An identified list of risks, or a risk breakdown
structure, for the project• A project schedule• A clearly defined set of questions you will ask
experts
In addition, your team of experts should be aware of any personal interest that expert may have regarding particular issues. It helps to mitigate motivational biases.
![Page 18: Project Risk Analysis with Risk Event and Event Chain](https://reader038.vdocuments.site/reader038/viewer/2022110115/548415b0b4af9f18728b48c7/html5/thumbnails/18.jpg)
Psychological Factors
• Availability heuristic: people judge the probability of the occurrence of events by how easily these events are brought to mind.
• Anchoring heuristic: refers to the human tendency to remain close to the initial estimate.
• Wishful thinking: when we overestimate the probabilities of opportunities and underestimate the probabilities of risks.
![Page 19: Project Risk Analysis with Risk Event and Event Chain](https://reader038.vdocuments.site/reader038/viewer/2022110115/548415b0b4af9f18728b48c7/html5/thumbnails/19.jpg)
Overestimating the Probability of Compound Events
If the probability of a defect in a component is 20% and the device uses three redundant components, the probability of the defective device will be (0.2 * 0.2 * 0.2) = 0.008%.
People tend to think this number is much higher.
![Page 20: Project Risk Analysis with Risk Event and Event Chain](https://reader038.vdocuments.site/reader038/viewer/2022110115/548415b0b4af9f18728b48c7/html5/thumbnails/20.jpg)
Ignoring Base-Rate Frequencies
• Historically, the probability that a particular component will be defective is 1%.
• The component is tested before installation. • The test showed that the component is defective. • The test usually successfully identifies defective
components 80% of the time. • What is the probability that a component is
defective?
The correct answer is close to 4%, however, most people would think that answer is a little bit lower than 80%.
![Page 21: Project Risk Analysis with Risk Event and Event Chain](https://reader038.vdocuments.site/reader038/viewer/2022110115/548415b0b4af9f18728b48c7/html5/thumbnails/21.jpg)
Eliciting Judgment About Probabilities of Single Events
• Pose a direct question: “What is the probability that the project will be canceled due to budgetary problems?”
• Ask the experts two opposing questions: (1) “What is the probability that the project will be canceled?” and (2) “What is the probability the project will be completed?” The sum of these two assessments should be 100%.
• Break compound events into simple events and review them separately.
![Page 22: Project Risk Analysis with Risk Event and Event Chain](https://reader038.vdocuments.site/reader038/viewer/2022110115/548415b0b4af9f18728b48c7/html5/thumbnails/22.jpg)
Probability Wheel
25% No delay of activity
35% 3 day delay of activity
40% 5 day delay of activity
![Page 23: Project Risk Analysis with Risk Event and Event Chain](https://reader038.vdocuments.site/reader038/viewer/2022110115/548415b0b4af9f18728b48c7/html5/thumbnails/23.jpg)
Task Duration
4
8
12
16
20 100%
80%
60%
40%
20%
Fre
quen
c y
Pro
babi
lity
2 3 4 5 6
(days)
Question: What is the chance that durationis less than 3 days?
Eliciting Judgment: Probability Method
![Page 24: Project Risk Analysis with Risk Event and Event Chain](https://reader038.vdocuments.site/reader038/viewer/2022110115/548415b0b4af9f18728b48c7/html5/thumbnails/24.jpg)
Eliciting Judgment: Method of Relative Heights
Task Duration
2
4
6
8
10
2 3 4 5 6
50%
40%
30%
20%
10%F
req u
ency
Pro
b abi
li ty
(days)
Question: How many times the durationwill be between 2 and 3 days?
![Page 25: Project Risk Analysis with Risk Event and Event Chain](https://reader038.vdocuments.site/reader038/viewer/2022110115/548415b0b4af9f18728b48c7/html5/thumbnails/25.jpg)
How Many Trials Are Required?
Huge number of trials (> 1000) usually does not increase accuracy of analysis
• Incorporate rare events • Use convergence monitoring
![Page 26: Project Risk Analysis with Risk Event and Event Chain](https://reader038.vdocuments.site/reader038/viewer/2022110115/548415b0b4af9f18728b48c7/html5/thumbnails/26.jpg)
What Is The Chance That a Project Will Be on Time And Within Budget?
![Page 27: Project Risk Analysis with Risk Event and Event Chain](https://reader038.vdocuments.site/reader038/viewer/2022110115/548415b0b4af9f18728b48c7/html5/thumbnails/27.jpg)
Analysis of Monte Carlo Results
• Sensitivity and Correlations • Critical Indices • Crucial tasks• Critical Risks• Probabilistic Calendars • Deadlines • Conditional Branching • Probabilistic Branching • Chance of Task Existence
![Page 28: Project Risk Analysis with Risk Event and Event Chain](https://reader038.vdocuments.site/reader038/viewer/2022110115/548415b0b4af9f18728b48c7/html5/thumbnails/28.jpg)
Analyze Results
04/10/23 2009 Intaver Institute 28
![Page 29: Project Risk Analysis with Risk Event and Event Chain](https://reader038.vdocuments.site/reader038/viewer/2022110115/548415b0b4af9f18728b48c7/html5/thumbnails/29.jpg)
Result Gant
04/10/23 2009 Intaver Institute 29
When you have project schedule and risk breakdown structure ready click here to perform Monte Carlo simulations
When you have project schedule and risk breakdown structure ready click here to perform Monte Carlo simulations
RiskyProject employs convergence monitoring to ensure fast calculation
RiskyProject employs convergence monitoring to ensure fast calculation
![Page 30: Project Risk Analysis with Risk Event and Event Chain](https://reader038.vdocuments.site/reader038/viewer/2022110115/548415b0b4af9f18728b48c7/html5/thumbnails/30.jpg)
Risk Register
Pre-mitigation Probability, Impact,And Score
Pre-mitigation Probability, Impact,And Score
04/10/23 2009 Intaver Institute 30
![Page 31: Project Risk Analysis with Risk Event and Event Chain](https://reader038.vdocuments.site/reader038/viewer/2022110115/548415b0b4af9f18728b48c7/html5/thumbnails/31.jpg)
Result Gantt Chart
04/10/23 2009 Intaver Institute 31
White bars represent original project
schedule (no risks)
White bars represent original project
schedule (no risks)
Blue bars represent project schedule with
risks
Blue bars represent project schedule with
risks
Because of risks, project duration significantly increased
Because of risks, project duration significantly increased
![Page 32: Project Risk Analysis with Risk Event and Event Chain](https://reader038.vdocuments.site/reader038/viewer/2022110115/548415b0b4af9f18728b48c7/html5/thumbnails/32.jpg)
Results of Risk Analysis
04/10/23 2009 Intaver Institute 32
Project Summary: project duration,
cost, and finish time with and without
risks
Project Summary: project duration,
cost, and finish time with and without
risks
Results of analysis for project cost, finish time, and
duration
Results of analysis for project cost, finish time, and
duration
Double click on any chart to view detailed informationDouble click on any chart to view detailed information
![Page 33: Project Risk Analysis with Risk Event and Event Chain](https://reader038.vdocuments.site/reader038/viewer/2022110115/548415b0b4af9f18728b48c7/html5/thumbnails/33.jpg)
Detailed Results of Analysis
04/10/23 2009 Intaver Institute 33
Move the slider to determine the chance that project will be within
budget
Move the slider to determine the chance that project will be within
budget
Get detailed statistical dataGet detailed statistical data
Data can be exported as an image or text
Data can be exported as an image or text
Detailed results can be shown for each tasks or whole project for cost, duration, start time, finish time, and income.
Detailed results can be shown for each tasks or whole project for cost, duration, start time, finish time, and income.
![Page 34: Project Risk Analysis with Risk Event and Event Chain](https://reader038.vdocuments.site/reader038/viewer/2022110115/548415b0b4af9f18728b48c7/html5/thumbnails/34.jpg)
Sensitivity
04/10/23 2009 Intaver Institute 34
Tornado chart shows risks or other parameters have the most
affect on the project schedule
Tornado chart shows risks or other parameters have the most
affect on the project schedule
Top critical risks need to be mitigated firstTop critical risks need to be mitigated first
![Page 35: Project Risk Analysis with Risk Event and Event Chain](https://reader038.vdocuments.site/reader038/viewer/2022110115/548415b0b4af9f18728b48c7/html5/thumbnails/35.jpg)
Crucial Tasks
04/10/23 2009 Intaver Institute 35
Crucial tasks have the most affect on the project schedule
Crucial tasks have the most affect on the project schedule
Crucial tasks for project cost and duration can be different
Crucial tasks for project cost and duration can be different
![Page 36: Project Risk Analysis with Risk Event and Event Chain](https://reader038.vdocuments.site/reader038/viewer/2022110115/548415b0b4af9f18728b48c7/html5/thumbnails/36.jpg)
Success Rate
04/10/23 2009 Intaver Institute 36
A task can be canceled if it reaches a task or a project deadline or if it is affected by risk with a “Cancel task” outcome.
Success rate is calculated based on number of times the task is not
canceled
Success rate is calculated based on number of times the task is not
canceled
![Page 37: Project Risk Analysis with Risk Event and Event Chain](https://reader038.vdocuments.site/reader038/viewer/2022110115/548415b0b4af9f18728b48c7/html5/thumbnails/37.jpg)
Risk Chart
04/10/23 2009 Intaver Institute 37
Risk chart show risks, associated with task versus duration or cost
This task has low duration but high
risk
This task has low duration but high
riskThese tasks have
balanced risk versus duration ratio.
These tasks have balanced risk versus
duration ratio.
![Page 38: Project Risk Analysis with Risk Event and Event Chain](https://reader038.vdocuments.site/reader038/viewer/2022110115/548415b0b4af9f18728b48c7/html5/thumbnails/38.jpg)
Risk Matrix
04/10/23 2009 Intaver Institute 38
Risk matrix shows probability/impact on 5x5 matrix
Double-click on a risk to view risk
assignments
Double-click on a risk to view risk
assignments
Risk Probability, Impact and Score for the current schedule
Risk Probability, Impact and Score for the current schedule
![Page 39: Project Risk Analysis with Risk Event and Event Chain](https://reader038.vdocuments.site/reader038/viewer/2022110115/548415b0b4af9f18728b48c7/html5/thumbnails/39.jpg)
Risk Planning
04/10/23 2009 Intaver Institute 39
Modeling risk mitigation efforts •Risk handling strategies
•Transfer•Mitigate•Eliminate•Ignore
•Risk mitigation efforts represent their own costs etc. which must be accounted for•Create multiple baselines that model pre and post mitigation risk handling efforts•View results of risk handling efforts •Select project alternative based on criteria (cost, duration, start and finish time, success rate)
![Page 40: Project Risk Analysis with Risk Event and Event Chain](https://reader038.vdocuments.site/reader038/viewer/2022110115/548415b0b4af9f18728b48c7/html5/thumbnails/40.jpg)
Future Reading
Lev Virine and Michael Trumper
Project Decisions:
The Art and Science
Management Concepts, Vienna, VA, 2007
Lev Virine and Michael Trumper
Project Think:Why Good Managers Make Poor Project Choices
Gower, 2013