Blog: Project Management and Project Risk Analysis

May 29, 2020
Cost risk analysis

Project cost risk analysis determines chance that project will be completed on budget given uncertainties related to cost. It works together with schedule risk analysis as part of integrated process and utilizes Monte Carlo simulations of project schedules. Project cost risk analysis also helps to determine critical risks affecting project cost, as well as calculate probabilistic cash flow. Result of project cost risk analysis are presented using cost histograms for statistical distribution of task and project cost, cumulative project cost charts or probabilistic cash flow charts.

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May 14, 2020
Probabilistic Branching in New Product Development Projects

Forecasting how long it will take to get a new product to market is difficult at best, but when developing products for highly regulated markets such as pharmaceuticals and medical devices strict testing regime can add additional risk and uncertainty. For example, US Food and Drug Administration (FDA) mandates multi-phase approval process for validation of safety, efficacy, and efficiency of new drug and vaccines. The possible impact of testing regimes on the cost and time required for successful product development can be modeled using Probabilistic Branching in combination with Monte Carlo simulations.

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April 20, 2020
Risk Matrix and How to Use It

A risk matrix is a project management tool that allows a single page – quick view of the probable risks evaluated in terms of the severity or impact or risk and likelihood or probability of the risk plotted the x and y axis. Risk matrix usually has cells associated with different ranges of probability and impact. Risk matrix may include arrows, which represent probability and impact of risk after mitigation.

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April 3, 2020
Diagramming Tools for Risk Identification

A number of diagramming techniques are used for risk identification. All these tools can be used as part of risk identification workshop where moderators enter information about risks during discussion and present it to the experts. This can be performed with specialized software of simply paper and pen.

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March 17, 2020
Analysis of Risk Mitigation and Risk Response Scenarios

Risk mitigation and risk response in projects can be done different ways. Scenario analysis is the useful tool to evaluate different risk mitigation and risk response options. The analysis can be performed by Monte Carlo simulation of project schedules with different sets mitigation and response activities.

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February 25, 2020
Lean Scheduling and Risk Management

Lean  scheduling is a process aimed to minimize waste in the workplace to maximize value. It is widely used in construction projects. Schedules define each task for the project team and how long it should take to complete each one. Read practical recommendation, how risk management and risk analysis can be used to improve lean scheduling in project management.

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January 31, 2020
Risk Visibility and Approval Rules

Each project portfolio usually has Risk visibility rules. These rules define how risks will be visible when they are first entered in the portfolio. For example, when risk is first added to the register, visibility settings are portfolio level, for all summary projects, immediate summary project, or current project.

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December 7, 2019
Probabilistic resource leveling

Probabilistic resource leveling is resource leveling with taking into an account risks and uncertainties associated with project schedule. It can be done using Monte Carlo simulations. There are different ways how probabilistic resource leveling can be performed. In some cases probabilistic resource leveling can give useful and accurate results. In other cases it can be confusing.

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November 20, 2019
Project Risk Impact for Different Risk Categories

Each risk can affect project duration, cost, quality, safety, security, technology, public relations, etc. These are the different risk categories. Impact of the risks on different categories can be different. The article shows how to calculate impact of the risk on different categories and prioritize such risks.

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October 27, 2019
How Many Monte Carlo Simulations Are Required

Some people believe that if they increase number of iterations in Monte Carlo simulation, they will have much more accurate results. But remember that the accuracy of results depends on the accuracy of input data or in our case, how we define statistical distributions for task cost, duration and other parameters.

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September 4, 2019
Role of the PMO in Project Risk Management

The Project Management Office (PMO) provides risk management governance over the project portfolio to ensure that risks are managed consistently and aligns with the organizations objectives.

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August 8, 2019
Qualitative Risk Analysis for IT and Software Development Projects

IT Projects experience more risk than most other types of projects, a phenomenon that suggests that IT project managers would be wise to manage and hopefully minimize project risks. Now that we have made the case that if you are the PM of a IT project you need to manage risk, here is a brief overview of how you can quickly put one in place.

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July 12, 2019
Risk Analysis of Linear Projects

Linear projects or location based projects are usually construction projects, such as pipelines, buildings, and roads. In addition to standard scheduling data (start/finish times, duration, resources, and costs) each activity has location data. Time location charts could be presented for original project schedule and risks-adjusted project schedule. Risk adjusted project schedule is a result of project risk analysis

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June 10, 2019
Risk Scores

To increase the accuracy and validity of the risk scores and ranking, RiskyProject calculates risk scores based on their measured impact on defined project parameters such as duration or costs. Risk probability and impacts to cost and schedule assigned to project activities and resources. So, in addition to the estimates for probability and impacts, the calculation also takes into account estimates for task durations, costs, and resource allocation.

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May 6, 2019
Project Risk Identification

What could possibly happen to my project? If you are a project manager or member of a project team, this question has probably crossed you mind on many occasions and it is a key to project success. When you ask this question, you are identifying risks that could happen during your project, which is the first step in managing your project risks. This step is called “Risk Identification” just asking what could happen is a good way to start, there are several methodologies you can use to improve your ability to identify project risks.

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April 17, 2019
Project Risk Resilience

Project risk resilience is an ability of project to meet its objectives on time and on budget with all risks, which may affect the project. To achieve it you need to define risk strategy: to mitigate, transfer, avoid or accept risks.

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March 31, 2019
Project Risk Events or Project Uncertainties: What is the Difference?

Normally when we model project risks we use:

  • Risk events, which affect tasks or resources. These risk events may increase or reduce task duration, cost, start and finish times, work, lags and other task parameters. Risk events are defined by probabilities and impacts.
  • Uncertainties in task duration, cost, start and finish times, rates, work and other parameters; they are expressed as statistical distributions.

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February 18, 2019
Visualization of Project Risks and Uncertainties
Risk adjusted project schedules can be visualized by Gantt charts, which can help to compare original project schedule without risks and uncertainties and result of analysis. Event chain diagrams can also be used to visualize risks events.
January 11, 2019
Managing Risks in Large Projects

Managing risk is inherent to managing projects. In fact, managing project risk could be considered the single most important  aspect of project  management as all projects have risks and uncertainties that can are the underlying causes of missed deadlines and cost overruns. While all projects face these obstacles, large projects are especially vulnerable due to complexity.  As projects grow in scope, they also experience an almost exponential growth in complexity and a concurrent growth in an exposure to risk events and uncertainties and can result in out of control costs and schedule and project failure. It is therefore critical that additional risk management strategies are put in place to give your team the best chance to be successful.

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December 8, 2018
Project Risk Analysis for Oil and Gas Projects

Project cost and schedule risk analysis is an important process in the management of energy portfolios. Capital cost represents about 40 of all costs in the portfolios. Risks can significantly increase costs due to project delays and other cost escalations. Cost escalations of more than 30% are common and especially prevalent in new plays where developers have less experience with local conditions. The impact of risks on exploration projects is even higher; therefore, it is extremely important to identify and manage critical risks as part of cost control measures.

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November 4, 2018
Enterprise Risk Management vs. Project Risk Management

If you are a history buff like myself, you have probably come across the following statement, “Tactics win battles, but strategies win wars” or something to that effect. While I often find that martial analogies tend to be overused in discussions on project management, but I do think it is applicable when the topic is Enterprise Risk Management . Like an army, companies must adopt specific tactics to ensure the success of specific battles (projects), but at the same time support the underlying capabilities of the army (company) through high level planning and execution of strategies to ensure they win the war, or in the case of companies, remain profitable.

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October 24, 2018
Project Risk Management Software Features

Here is an overview of mandatory and nice to have risk management software features. There are a number of specific features related to project management, particularly schedule and cost project risk analysis, which makes project risk management different from enterprise risk management.

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September 21, 2018
Project Risk Analysis Templates

Project risk analysis templates outline the recommended information that should be captured as part of project risk analysis. They include Risk Breakdown Structure Templates and Risk Properties Templates. In many cases project risk register templates are easy to use and at the same time are very useful tools for project risk management and project risk analysis.

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August 31, 2018
Risk Events vs. Uncertainties in Project Risk Analysis

As part of the risk management plan, you usually identify risks events affecting duration, cost and other parameters, include them to the risk register, assign them to task and resources and perform Monte Carlo simulation of project schedules. To the casual observer, it seems quite straight forward that if you  have a well-defined risk plan and do a high quality risk analysis you have managed all of your risk. But the problem with this process is that it only incudes risk events and these only represent a slice of project risk often called “epistemic”. Epistemic risk is characterized by probability and impact and further is manageable, that is, the impact of these risks on your project can be reduced or eliminated through good management.  However, there is another source of uncertainties that cannot be managed or reduced referred to as “aleatory”. Aleatory uncertainties refer to the inherent variance that occurs in all processes.

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July 26, 2018
Risk Management Plan

A well-defined Risk Management Plan is the cornerstone of any risk management process and is key to overall quality of your project management. Risk management plans and risk analysis are two components of project risk management process. The Risk Management Plan is the core document that describes how risk management will be performed on a project.  Risk analysis or the assessment of the risks is a defined methodology that is used to analyze risks that impact a project.

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July 18, 2018
EVM and Project Risk Analysis

A question that we are often asked is how does project risk analysis (PRA) compare or relate to earned value management (EVM)? It often goes further, if I am doing EVM, is there a need for risk analysis, or is it redundant? In this case, while there is a little overlap, risk analysis and earned value are complementary practices as part of an integrated project/program management process. This begs the question, how do the two complement each other. First, let’s define earned value and project risk analysis.

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July 3, 2018
Value of Project Risk Analysis

Many project managers are woundering if there is any value in project risk analysis. Project risk analysis takes effort, requires experienced personnel with specialize knowledge and requires risk analysis software. But does it provide benefits, namely reduction of project duration, cost reduction, efficient resource allocation and others? We believe that value of project risk analysis is in risk prioritization or determining what risks can be mitigated first, analysis of efficiency of mitigation plans and calculating their cost and duration, and analysis of risks as part of project control and just-in-time execution of project risks.

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May 28, 2018
Availability Bias in Project Management

Availability bias is a mental shortcut according to which people are making assessment of probability of certain events not based how often such events occurred, but how often do they come to mind. In project management it affects project estimations and risk assessment.

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May 17, 2018
Sensitivity Analysis

Sensitivity analysis is the quantitative risk assessment of how changes in a specific model variable impacts the output of the model. It is also a key result of Monte Carlo simulations of project schedules. Often referred to as a Tornado chart, sensitivity analysis shows which task variables (Cost, Start and Finish Times, Duration, etc) have the greatest impact on project parameters. In projects, we are looking at how uncertainties and risks assigned to specific activities correlate with variance in the project. For example, sensitivity analysis allows you to identify which task’s duration with uncertainty has the strongest correlation with the finish time of the project.

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April 30, 2018
Adaptive project management and project control

Adaptive project management is a project management technique that includes generation of multiple hypotheses, modelling and execution some of them, and performing project control to determine if hypotheses and overall strategies are correct.

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April 17, 2018
Project Risk Assessment

Project risk assessment is a process of identification, classification, and quantitative and qualitative analysis of risks affecting projects. Risk assessment is a combination of two processes: identification and scoring with the goal of prioritizing and ensuring that sufficient resources are allocated to each risk in accordance with the threat or opportunity that it represents to a project.

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March 20, 2018
Project Control and Risk Management

Project controls is a process of gathering and analyzing current project performance to forecast and manage potential project cost and schedule outcomes. This analysis process commonly includes both Earned Value (EV) and quantitative risk analysis to produce forecasts. EV is a widely used methodology that uses past performance as the basis to produce deterministic project forecasts. The assumption is that past performance will predict the future. However, this is often not the case as different phases of a project may have different levels of risk and uncertainties.

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February 22, 2018
Project Risk Score

Project risk scores are an indicator, which show the level of project risk exposure. It is used to compare, prioritize and manage projects in your project portfolio. With project risk scores, we can identify those projects which could have the greatest impact on your ability to successfully execute the projects in your portfolio. Project risk score calculation based on qualitative or quantitative project risk analysis.

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February 13, 2018
Project Portfolio Risk Analysis

A majority of projects are managed not in isolation but as part of a project portfolio or program. Managing risks in project portfolios bring some new challenges including:

  • How risks are shared between projects
  • How to rank a project within a portfolio based on risk exposure
  • How to change project priorities based on risk exposure
  • How to reallocate resources within a portfolio as a response to risk
  • How to perform risk mitigation, if risk is shared between different projects within a portfolio

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February 9, 2018
Weather Calendars for Project Risk Analysis

Many projects have uncertainties with respect to the weather. Certain operations cannot be performed in bad weather. In construction and with oil & gas projects, weather is in fact one of the greatest risks. Weather uncertainties can be modeled in different ways. One of the most common methods of modeling weather uncertainty is a weather calendar. This method can give you accurate results as long as you have historical data: how many non-working days this or a similar project experienced in the previous year.

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February 4, 2018
What are the benefits of project risk analysis?

“How do I convince my team that this is worth the effort?” is one of the frequently asked questions that we run across during our discussions with project teams and it is a good question that deserves an answer. Project risk analysis is not without cost, it takes time and effort to develop the culture, processes and tools to perform effectively and often, while the time and cost required is self-evident, the benefits can often be difficult to discern and the ones that  are most important are often not the most obvious.

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January 25, 2018
Project Contingency Planning and Risk Analysis

Determining and managing project contingency buffer or project margin or reserve is one of the critical steps of project scheduling and project control. Most schedulers include a certain margin or buffer in the original schedule to ensure that the project is completed on time in case of delays. The same margin can be applied to the project cost. The question is how much is this buffer supposed to be? Is it 20% of the total project duration? Maybe it is a fixed number of days or months? The answer depends on what risk events can occur during the course of the project. Some research and development projects can be very risky and require a longer buffer while other projects may have a relatively small buffer. Quantitative project risk analysis can help to determine and control a project buffer.

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January 12, 2018
Agile Project Management and Quantitative Analysis

Quantitative risk analysis is a valuable component of the project risk management process for any project managed by traditional methods, for example, in the construction industry. What about projects managed by agile methods, for example in software development? Agile approach has a number of principles. Some of these principles are directly related to project scheduling and risk management:

  • The project is performed iteratively where the next iteration is planned based on results of previous iteration.
  • The project plan is defined on a high level usually as a set of sequential iterations with their deliverables.
  • Detailed Risk register with probabilities and impact often are not explicitly defined; instead there is a backlog of issues which need to be resolved in each iteration.

We believe that even for agile project management quantitative risk analysis would be a valuable project planning tool.

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January 8, 2018
Mexican Vacations and Value of Qualitative Risk Analysis

Is there any value in qualitative risk analysis or is it just a burden? Qualitative risk ananlysis is mostly a mental exercise. Risk identification, assessment of risk probabilities and impact makes you think about about three main questions:

  • What can happen?
  • How will it impact what i’m doing?
  • What do I do about it?

People make wrong choices simply because they don’t ask themselves these questions or if they do, they don’t allocate adequate mental effort in to thinking through these questions. For example, people tend to forget something or are overoptimistic in assessing future risks. The value of formal qualitative risk analysis is to help people to understand the implications of what they are going.

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December 15, 2017
Taxation and Adaptive Project Management

The US government is currently in the process of changing the federal tax framework. There is a lot of discussion about the content of these changes, how it will affect business environments, personal finances, and government departments. The bottom line is that taxation is a complex issue and that nobody will know its exact impacts until it is actually implemented and in place for some time. For example, the new tax bill is will reduce corporate taxes in an attempt to increase economic growth. What is unknown is how companies will employ this additional revenue. Will they reinvest it in US economy or just pay dividends to shareholders of which a significant portion of them are outside the US? Our opinion is that tax regulation, as well as many other complex government regulations should be implemented based on Adaptive Project Management principles.

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December 14, 2017
Uncertainties in Project Risk Analysis

“Pirates of the Caribbean: On Stranger Tides” by Disney released in May 2011 is the most expensive movie in history at a cost of  $410.6 million. Despite the significant cost, the movie was profitable with revenue over $1,054 million worldwide, half of which went to movie theatres. According to financial statements, this huge cost was not due to overspending.  The largest cost were incurred paying actors and production staff, Johnny Depp received $55 million. Movie production is a creative process with a very large number of uncertainties that can affect the movie budget and completion date of the project. A few risk events combined, can result in massive cost overruns.

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