1. Risk Event Modeling Intaver Institute Inc.
303, 6707, Elbow Drive S.W, Calgary, AB, Canada
Tel: +1 (403)
Fax: +1 (403)
4280 East Tamiami Trail, 302-M, Naples Florida, 34112, USA
Tel: +1(510)

2. The Project Management Problem
Many projects are unsuccessful!
Budget
Schedule
Quality
Other measures
Projects consistently fail to meet:
2009 Intaver Institute

3. The Project Management Problem
Key Project Management Issues
How to estimate project duration or cost?
What are the most critical risks and how to handle them?
How to measure project performance?
How to make an informed decision about the future course of the project?
2009 Intaver Institute

4. The Project Management Problem
Reasons
Human psychological limits
Inadequate training
Poor processes
other
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2009 Intaver Institute

5. The Project Management Problem
Risk management key to project success
Risks are events that can occur during a project that changes to course of a project
Risk is key source of project uncertainty and major root cause of project failure
Limited ability to forecast and manage project uncertainty due to risk
2009 Intaver Institute

6. The Project Management Problem
Chains of unfortunate events
Risks can form event chains
A risk occurs and causes another risk to occur, which causes yet another
Unexpected result of a series of events derail projects
Statistical sampling or Monte Carlo simulations the best solution for modeling the effect of related and unrelated project risks
2009 Intaver Institute

7. Understand impact of risk on projects
Benefits
Understand impact of risk on projects
Understand project risk and uncertainty in Cost and Duration
Identify critical risks and activities
Model risk handling efforts
Improved contingency and buffer plans
Monitoring with risks and uncertainties provides strong, early signals of impending issues
2009 Intaver Institute

8. Risk Event Modeling Workflow
Uses common PM artifacts
WBS
Resources
Costs
Risk Register or Risk Lists developed for qualitative risk management
Why is this easy
2009 Intaver Institute

9. 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)
2009 Intaver Institute

10. 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.

11. Monte Carlo Simulations

12. Monte Carlo Schedule Analysis

13. 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.

14. Two Approaches for Defining Uncertainties
Distribution-based approach
Event-based approach

15. Which Distribution Should Be Used?
Also useful:
Lognornal
Beta

16. Distribution Fitting

17. 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.

18. 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.

19. 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.

20. 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%.

21. Eliciting Probabilities of 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.

22. Probability Wheel

23. Eliciting Judgment: Probability Method

24. Eliciting Judgment: Method of Relative Heights

25. How Many Trials Are Required?
Huge number of trials (> 1000) usually does not increase accuracy of analysis
Incorporate rare events
Use convergence monitoring

26. What Is The Chance That a Project Will Be on Time and Budget?

27. 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

28. Identify critical risks and tasks
Analyze Results
Risk Scores
Overview with and without risks
Detailed results of analysis
View results
Sensitivity
Crucial Tasks
Success Rate
Risk Chart
Identify critical risks and tasks
Risk Matrix
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2009 Intaver Institute

29. Project Gantt
When you have project schedule and risk breakdown structure ready click here to perform Monte Carlo simulations
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2009 Intaver Institute

30. Risk Register Pre-mitigation Probability, Impact, And Score
Risk register is central point of entry into risk analysis and management system
Shows calculated project risk scores – ranks and identifies critical project risks.
Add two screen shots.
Risk Register
Risk Assignment
Add slide with Risk Mitigation Waterfall diagram with descriptive names
12/6/2018
2009 Intaver Institute

31. Result Gantt Chart
White bars represent original project schedule (no risks)
Blue bars represent project schedule with risks
Change to put calculated results in the Result Gantt chart
Because of risks, project duration significantly increased
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2009 Intaver Institute

32. Results of Risk Analysis
Project Summary: project duration, cost, and finish time with and without risks
Results of analysis for project cost, finish time, and duration
Double click on any chart to view detailed information
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2009 Intaver Institute

33. 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
Detailed results show certainty levels or the chance that a project parameter will be a certain value. Allows you to see the values e.g. managing at 75% certainty as well as setting buffers or contingencies.
Get detailed statistical data
Data can be exported as an image or text

34. Sensitivity Critical risks need to be mitigated first
Tornado chart shows risks or other parameters that have the most affect on the project schedule

35. Crucial Tasks
Crucial tasks for project cost and duration can be different
Crucial tasks have the most affect on the project schedule

36. 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.
Calculates the success rates of tasks or project based upon deadlines or constraints
Success rate is calculated based on number of times the task is not canceled

37. Risk Chart
Risk chart show risks, associated with task versus duration or cost
This task has cost and high risk
These tasks have balanced risk versus Cost ratio.

38. Risk matrix shows probability/impact on 5x5 matrix
Double-click on a risk to view risk assignments
Risk Probability, Impact and Score for the current schedule

39. Risk Planning 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)

40. 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