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Qualitative and Quantitative Risk Analysis
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All projects have risks and uncertainties. In some cases, for example in most research and development project the effect of such risks and uncertainties can be very significant. However many managers still did not employ proper project risks management processes for their projects. In many cases they don’t believe, that establishing and implementation of such process will be beneficial, since it is difficult to predict all potential risks and their affect of the project.
There is a classical example. One of the Intaver Institute’s clients, the large oil company, performed a drilling of the well with total cost about $2M. Project schedule has been created based of analogs: drilling of similar wells in the similar geological conditions. At the middle of drilling the mud, required to this technological process, starts disappearing. Project engineers have tried different solutions. It delayed the project so significantly that total cost of the well has almost doubled. Later on the project manager has admitted that it would be cheaper to abandon the well and drill new one somewhere else. Or perhaps don’t start drilling in the particular location in a first place. Unfortunately the company did not have well established project risk management process at this time. What should be done is to properly analyze project with risks and uncertainties at the stage of project planning, and then reassess risks during a course of the project.
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