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 costs 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. A few risk events combined, can result in massive cost overruns.

When asked about uncertainties, most project managers would probably refer to “delays and cost increases”. In reality, the project may have many different types of uncertainties expressed in different ways:

  1. Task duration uncertainties: They can be defined by a statistical distribution, but as risk events. These risk events can increase task duration by a specific amount of time (fixed duration increase) or a percent (relative duration increase). They can also cause restarts or cancellations of tasks. The actual moment of the risk event occurring during the course of a task can be uncertain. For example, if the task: “Construction of production set” is restarted at the beginning, the overall duration increase will be much smaller than if the task is restarted at the end. Lags can also have uncertain durations and have risks assigned to them.
  2. Resource usage uncertainties: how resources are assigned to tasks.  assignment units, and resource rates  can also be uncertain. For example, the rate for some services can change half way through production. Even the amount of work required can be defined as a statistical distribution.
  3. Cost uncertaintiest : costs may be defined by uncertainties or be  impacted by risk events.
  4. Constraint uncertainties: Task constraints can be probabilistic. If an actor is unavailable for a period of day, the whole production may be delayed .
  5. Conditional branching: certain tasks are only performed when certain conditions related to a project schedule are met. For example, if movie scenes need to be reshot and production is delayed, some future activities must be accelerated to meet the deadline.
  6. Probabilistic branching: there is a probability that certain tasks can be executed.
  7. Execution of risk response plan:  if a risk occurs  this can trigger  the execution of new activities not included to the baseline schedule.
  8. Probabilistic and weather calendars: there is probability that the weather will cancel production, which is an uncertain event.

Uncertainties in Project Risk Analysis

[1]   Sylt, C. 2014. Pirates Of The Caribbean Is Most Expensive Movie Ever With Costs Of $410 Million. Forbes.