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Quantitative Risk Analysis (QRA), Decision Making Under Uncertainty
Quantitative Schedule Risk Analysis (QSRA)
A schedule risk analysis (SRA) uses a risk-based project schedule (derived from the master schedule) to apply statistical techniques to envisage a level of confidence in meeting a project’s completion date. The analysis focuses on uncertainty and risks that affect the overall schedule, i.e., activity durations and completion date. SRA starts with reviewing the project schedule and performing schedule quality checks as specified by DCMA 14-points.
A sequence of activities and activity relationship plays an important role to avoid “Garbage in and Garbage out”. Also visit https://www.gleeym.com/services/riskmanagementsystem/
Schedule risk analysis (SRA) helps to analyze the uncertainty in the project schedule using Monte Carlo Simulation. Deterministic schedule duration and finish date don’t provide enough information to answer flowing questions:
- What is the probability of completing the project on the target date?
- What if the predecessor of an activity finishes late?
- What is the eighty (90%) chance of finishing the project?
SCR scope is:
- Schedule Risk Analysis (SRA) to analyze uncertainty.
- Correlating the activities
- Probabilistic Branching
Webinar - Watch it for Free
Capital Project Petrochemical Process Plant, IRR, And NPV Analysis – Webinar
Digital Product Development and Decision Making Under Uncertainty
The failure rate is high in case of digital product Development. Technology, competitors, and market dynamics are the key factors, but one can’t ignore cost and schedule.
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Project Schedule Quality Check for Schedule Risk Analysis:
There can be several other parameters that can contribute to quality SRA. Like:
- Contain all the activities that are necessary for the SRA.
- Keep in mind there is a difference between “Master Schedule” and Schedule for risk analysis.
- All activities should be linked together.
- The sequence of activities plays an important role. Improper sequence of activities is one of the causes of conflicts in major complex projects.
- Get the buy-in from all the key stakeholders.
- Specify the assumptions and analyze the assumption during the simulation.
- Specify the uncertainties for each activity i.e. min. most likely and the max. Avoid heuristics estimates.
- Try to get rid of “Cognitive Bias”. Although it is very difficult. Support from top executives may help.
- Depending upon the level of schedule. It takes days or weeks or even months to develop a schedule. There is no magic to perform SRA and visualize the data in seconds. Need to perform SRA several times with different scenario to compare results.
- Overlay results to analyze and visualize the difference between various output by varying the input data.
- Uncertainties may cover lack of knowledge activity duration estimation error, resource availability, organisational culture, internal and external factors, market conditions, political scenario, project execution methodology, resource availability, productivity, project constraints, technology constraints, Biased opinion, known – Known and even unknown – unknown (This scenario should be analyzed separately to understand the impact) etc.
Quantitative Cost Risk Analysis (QCRA)
Quantitative Cost Risk Analysis (QCRA) is performed on project financials and cost estimates using Monte Carlo Simulation (MCS). Cost is the main driver for making decisions. It’s the key factor that makes the management happy or unhappy. Business is all about monetary benefits. Class 5 cost estimate is developed during project initiation. Typical ranges for Class 5 cost estimate as per AACE can be ± 50% or ±100%. Uncertainty is high and confidence level is low. Therefore, it is necessary to consider all fixed and variable costs including overheads. Apply uncertainty and risk to model cost using probability distribution.
Integrated Cost and Schedule Risk Analysis (IRA)
Integrated Cost and Schedule Risk Analysis (IRA) is performed on schedule level – I, Level – II and Level -III loaded with time phased cost estimates.
Aligning resources to remain competitive and meeting strategic goals are cumbersome in this era of “Digital Transformation”. Digital transformation is reshaping the corporate world. Pursuing the digitizing requires a sense of urgency, change management agents, and the ability to choose the optimal decision based on the data. Decision making requires Data as input and presenting data in the form of alternatives/options to select the best one i.e. Risk-Based Decision Making.
In the concept phase, the project initial phase, presenting alternatives and choosing the best one is the key to success. Collecting data, reshaping the data, defining correlation and keeping eye on key risk drivers certainly helps to come to a conclusion and get buy-in from the key stakeholders. Presenting numbers/analytics to board members or partners are always a “Game Changer” to win.
Decision Tree Analysis helps to portray various decisions with data. Decision Tree infused with Date helps to determine optimal path and display combination of inputs for the corresponding output. It helps to better understand the uncertainties associated with the data and perform further analysis as per requirement for decision making.
Industry
Offer services to identify risks and perform Quantitative Schedule Risk Analysis (QSRA) and Quantitative Cost Risk Analysis (QCRA) for mega complex projects in industries like
- Oil & Gas
- PetroChemical
- Construction
- Manufacturing
- Product Development
- Outages
- Digital world
Webinars
1- Capital Project PetroChemical Construction Mega Project- https://go.palisade.com/WBN2020-08-14CapitalProjectPetrochemical.html
2- Digital Product Development and Decision Making under Uncertainty –
https://go.palisade.com/WBN2020-09-11DigitalProductDevelopment.html
Frequently Asked Questions:
I have an experience of managing projects, program and portfolio Management ranging from $ 100 K to $ 10 B. Deployed system and implemented software. Experience with developing quantitative schedule and cost risk analysis. Facilitated dozens of risk workshops.
1- Need project Scope
2- Project Charter
3- Project Management Plan
4- Project Schedule
5- Project Cost Estimates
Contact us for details.
Yes. We are well versed in developing risk models using excel and then perform quantitative risk analysis using Monte Carlo simulation (MCS). We extensive experience with @Risk. However, we are open to use Risk software as per your demand.
Yes. We have extensive scheduling experience.