Impact of estimate quality on risk assessments

This forum focus on project portfolio risk management theory and RiskyProject Enterprise software. Submit any questions about enterprise risk management, and qualitative / quantitative risk analysis for multiple projects. This forum also includes discussions about project risk analysis on the enterprise level.

Moderator: Intaver Support

Posts: 10
Joined: Thu May 04, 2006 3:50 pm
Location: LA, CA

Impact of estimate quality on risk assessments

Postby Stu1 » Fri Jan 11, 2019 2:28 pm

How does estimate quality affect the quality of a risk assessment?

Intaver Support
Posts: 804
Joined: Wed Nov 09, 2005 9:55 am

Re: Impact of estimate quality on risk assessments

Postby Intaver Support » Fri Jan 11, 2019 2:32 pm

In of themselves, the quality or accuracy of your cost and schedule estimates are a major risk a does not matter whether you are performing Monte Carlo or Critical Path analysis. The quality of any analysis is dependent upon the quality or accuracy of the inputs or as more commonly known
Garbage In and Garbage Out (GIGO). It is the recognition that any single point estimate for schedule or cost most likely wrong that Monte Carlo risk analysis was developed. The statistical distributions with the 3 pt estimates are an acknowledgement that all estimates have a degree of uncertainty and the range is a model of how much or how little confidence people have in the original single point estimate.

In the example below, we can see how you might model a 10-day activity when you have either very high or very low confidence in the quality of the estimate. While they both have a 10 day base duration, the range between the low and the high estimates are a function of the quality of the estimate. In the image, the white bar represents the base duration (10 days) the blue bar represents the possible range of outcomes based on the quality of the estimate.

Intaver Support Team
Intaver Institute Inc.
Home of Project Risk Management and Project Risk Analysis software RiskyProject

Return to “Project Portfolio Risk Management”

Who is online

Users browsing this forum: No registered users and 1 guest