How Risk Events and Uncertainties can affect your project
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This document discusses how risks and uncertainties can impact project schedules. It explains that risk events have probabilities and impacts that can cause project tasks to slip. It also describes how statistical distributions defined by low, base, and high estimates can model the uncertainties in task durations. Finally, it distinguishes between manageable risks that can be avoided, transferred or mitigated, and unmanageable residual risks or uncertainties that must be accepted.
How Risk Events and Uncertainties can affect your project
- 1. RiskyProject How Risk Events and Uncertainties can affect your project
- 2. Risk Adjusted Project Schedule Original Project Schedule Risk Adjusted Project Schedule Project slips due to the risks and uncertainties
- 3. 3 How Risk Events Affect Project Schedules Risk Events that Impact Project Tasks Each Risk Event: - Probability, e.g. 10% - Impact, e.g. “increase schedule by 5 days and cost by 20%”
- 4. 4 How Uncertainties affect Project Schedules Statistical Distribution of Task Durations Distributions are defined by: - Three points estimates (low, base, high) - Mean, statistician deviation, other statistical parameters BaseLow High
- 5. Manageable vs Unmanageable Risk Manageable Risk • Risk Events • Avoid, Transfer, Mitigate 5 11/17/2020 2014 Intaver Institute Margin and Contingency Mitigation Plans Unmanageable Risk • Accepted, Post-Mitigation Residual Risk • Uncertainties
Editor's Notes
- #2: In this video we are going to look at how risks and uncertainties can affect your project.
- #3: Here is a project schedule. When we run a Monte Carlo simulation with risks and uncertainties, the results is a Risk Adjusted Project Schedule. Here we can see how this affects possible completion dates due to slippage. Let’s take a look at how we assign risk to a project schedule.
- #4: Risk events can be assigned to your project schedule. The arrows indicate risk event assignments to activities and can be threats or opportunities Risk event assignments include probability and impact. For example, if a risk occurs it will cause a delay of 5 days, and increase cost by 20%
- #5: Schedules also have uncertainties which are variances that are not associated with risk events. All activities have uncertainty. This can be caused due to estimate errors, but also due to natural fluctuation in productivity, and other factors. Uncertainties are defined by statistical distributions defined by 3 pt estimates. The most commonly used distribution is triangular as it is easy to understand and does not require advanced knowledge of statistical methods. As we can see a fully risked schedule can have both risk events and uncertainties.
- #6: Through the analysis of risks and uncertainties, we can define 2 types of risk that the project has: Manageable and Unmanageable. Manageable risk is the impact of risk events. This risk can be managed by either minimizing the probability or impacts of the risk on your project objectives. This management is often referred to as mitigation planning. After Risks have been managed, your project still has unmanageable risk which is the residual risk left after mitigation activities plus the impact of uncertainties which by definition cannot be managed. Unmanageable risk cannot be reduced any further, so it is accounted for with Schedule Margin and Cost contingency and often referred to as risk adjusted cost and contingency and is set to cumulative probability percentile that reflects an organization’s risk tolerance. The higher the percentile, the lower the risk tolerance of an organization.
- #7: Thank you for watching. If you would like to learn more, please visit us at www.Intaver.com