1. Quantitative Project Risk Analysis

2. Agenda Introduction Part One Part Two Q and A
Project Decision Framework
Quantitative Analysis within Project Risk Management
Part Two
Practical Exercises
Q and A

3. Introduction Who is Intaver Institute? Formed 2002
Group of risk, economic, and decision analysis experts
All to some extent were involved in developing software tools for these fields

4. Problem Many IT projects were late or over budget
No readily available tools for the analysis of project schedules, the provided similar analysis as the ones they were developing for other industries
Decision analysis processes including quantitative analysis widely used in many industries, but not project management
Many project manager don’t believe in benefits of quantitative methods
Most methods and tools remain relatively complex, require special training, and expensive

5. Vision: Quantitative project analysis for the rest of us
Develop application
No specialist training required to get started
Easier to use and understand
Relatively inexpensive
Provide project decision analysis training and consulting to support application
© Intaver Institute 2009

6. Part One: Project Decisions Framework and Quantitative Analysis
Project Decision Analysis
Quantitative Project Risk Analysis and Management
Bring out parking lot questions

7. Project Decision Analysis
Successful projects are the result of good decisions
Structure decision analysis
Well defined process founded in decision analysis science
Applicable to project management
Provides framework that will improve project decisions
Decision Analysis vs. PMBOK
Decision analysis not in conflict with PMBOK
Can be easily integrated (as needed) into current PM

8. Risk Analysis Pyramid Risk Management Planning Quantitative Analysis
Qualitative Analysis
Risk Management Planning 8
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9. Quantitative Estimates
Uncertainties
3pt estimates
Distributions
Risk events
Chance
Outcome
Result
Moment of risk
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10. Types of uncertainties
Duration
Cost
Start and Finish Times
Lags
Rates and Resource Allocation
Entered as 3 pt estimate
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11. Types of Risk Task Resource Global (project or local)
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12. Risks or uncertainties?
Use uncertainties in cases where you have historical data that is both strong and analogous
Use uncertainties in cases where you have some historical data and strong expert opinion (experts have consensus)
Use risk events when little historical data exists to back up expert opinion
Use risk events on higher risk projects
You can use a combination of risk events and uncertainties
So what should we use.

13. Risk or uncertainties
Risk events are less prone to the effects of human biases and heuristics
Easier to recall effect of risk events on projects

14. Event Based Analysis
Risk event estimates less affected by heuristics and biases
Risk events estimates easier to obtain via relative frequency analysis
Event based analysis of causes of project uncertainty
Sensitivity analysis can be done to identify critical risks
Uncertainties require additional root cause analysis to identify critical risks
Risks are separated from the schedule and cost. When we use distributions, we set “boundaries” on them.
Risk events less effected as we do not know the statistical outcome until Monte Carlo is run. Less conscious or unconscious “gaming” of estimates.

15. Modeling Risk Events Chance - % chance that the risk will occur
Outcome – relative % or fixed (e.g. % cost increase, Fixed delay)
Result - 15%
Example Fire: 20% Chance of a Fixed Delay of 14 days
Risks can have mutually exclusive alternatives

16. Monte Carlo Analysis Statistical sampling
Runs many simulations of a project that produces probabilistic distributions of particular results (cost, duration, finish time, etc.)
Gaining popularity as size and power of hardware and software improve

17. Project Risk Analysis Create project schedule
Define project uncertainties
Define project risks
Perform Monte Carlo Simulations
Analyze results

18. RiskyProject Workflow
WBS
Resources
Costs
Risk List

19. RiskyProject Analysis

20. Results of Analysis
Project outcomes with and without risks and uncertainties
Sensitivity analysis
Cost analysis
Identifying critical risks and uncertainties
Success rates

21. Project Summary Main Project Parameters with and without risks
Probabilistic results

22. Result Gantt Chart
White bars represent original project schedule (no risks)
Blue bars represent project schedule with risks
Because of risks, project duration has significantly increased

23. Detailed Results of Analysis
Detailed results can be shown for each tasks or whole project for cost, duration, start time, finish time, and income.
Move the slider to determine the chance that project will be within budget
Get detailed statistical data
You may export this data to other software it graphic or text formats

24. Cost Analysis
You may compare cash flow with (blue line) and without (red line) risks
Cash flow is generated based on fixed and variables cost and income associated with tasks and resources

25. Crucial Tasks
Green bars represent tasks uncertainties that have almost no 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

26. Critical risks need to be mitigated first
Tornado chart shows the risks that have the most impact on project costs

27. 3 most important project parameters (cost, duration, and finish time)
Project Dashboard 3x3
Project Dashboard 3x3 is a condensed view for most important results of analysis
3 most important project parameters (cost, duration, and finish time)
3 most crucial tasks
3 most critical risks

28. Risk Chart
The risk chart shows risk uncertainty for tasks versus duration or cost
This task has high cost and risk
These tasks have balanced risk versus cost ratio.

29. Success Rate
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.
The deadline is causing calculation of the task in 86% of cases
This task is affected by one of many risks with impact “Cancel task”
Success rate is calculated based on number of times the task is not canceled

30. Tracking
For each task at any moment you may enter how much work has been completed
This task is 100% completed (green bar)
This task is partially completed (yellow bar)
Risky project automatically adjust probability of risks for partially completed tasks

31. Tracking Results
New project forecast is done each time actual project data is entered
Low, base, and high forecast
Actual project duration
Original (baseline) project duration

32. Intaver Institute
Intaver Institute performs project risk management, risk analysis, and decision analysis training and consulting
Download a trial version of RiskyProject at: (version 2.1)
White papers, presentations :
Courses:

33. Additional Resources Project Think:
Intaver Institute 2011
Additional Resources
Project Think:
Why Good Managers Make Poor Project Choices
Project Decisions: The Art and Science
Introduction to Project Risk Management and Decision Analysis
Project Risk Analysis Made Ridiculously Simple