Project Risk Management, Project Risk and Decision Analysis White Papers
- Project Project Management
- Project Decision Analysis
- Project Risk Analysis
- Event Chain Methodology
- Psychology of Project Management
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One of the fundamental questions of project management is, “What will be the duration and cost of the project given the multiple risks and uncertainties?” Program Evaluation and Review Technique (PERT) and Monte Carlo analysis may help to answer these and other questions. Monte Carlo analysis is a straightforward approach to deal with complex sets of project uncertainties. However, both Monte Carlo and PERT have a number of limitations that are related to the manner in which we identify and interpret uncertainties.
– Specific issues related to presentation of risk and decision analysis results
– How to deal with motivational biases when interpreting analytical reports
– Tips on presenting information about risks and uncertainties
– How to verbally express of probabilities
– How to interpret reports about rare events with catastrophic outcomes
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You are driving down a highway, and as usual, you have chosen the fast lane. However, today, it seems to be moving more slowly than usual and when you glance to the side, the adjacent lane appears to be moving faster. After 5 minutes without improvement, you are starting to wonder whether you should switch lanes, but because you have already spent some time what is normally the fast lane, you hope that it will eventually resume its normal pace. Essentially, you have become entrapped. In this paper we will discuss behavioral traps or situations where people become engaged in rational course of actions which later become undesirable.
A lot of the mental mistakes we are prone to in project management are related memory. Often, we cannot properly assess events because we have forgotten similar events that occurred in our past. In this paper we will explore how certain features of our memory can affect project management and how we can improve our memory and hopefully improve our project management.
To demonstrate how to use quantitative project risk analysis, we decided to use a well-known historical event, the assignation of U.S. President John Kennedy. We are trying to determine the chance that Oswald could complete his project – the assassination of President Kennedy – as it actually occurred. We do not claim to possess exact information especially with regards to the probabilities and impacts of certain risks; and therefore, cannot give a definite answer from the historical point of view. This example is only intended to illustrate project risk analysis methodology.
There are so many analytical techniques and tools, some of which are very complex and require a lot of effort to perform and others which are very industry specific. One of the very simple techniques is expected value analysis. This analysis is a choice engineering method, which means that it is more of a mental exercise rather than a strict and formal project management process. At the same time, going through the expected value thinking process may significantly improve quality of decisions.
In this paper we will learn about how decisions in project management are affected by our emotions. People make choices under the influence of emotions all the time. Emotions can lead to mental mistakes; mental mistakes lead to low quality decisions. We will not attempt a comprehensive review of human emotions; instead, we will explain why even the most emotionally intelligent people make irrational decisions when they find themselves in stressful situations. We will also provide few choice engineering ideas that will help you to mitigate the negative impact of emotions on your decisions in project management.
In this paper we are going to learn how to deal with risk. You may be familiar with the PMBOK Guide which describes a formalized approach to risk management. We are going to use a slightly different approach and focus on how choice engineering can be used for anaging project risk. We will discuss a few simple techniques that you can use that will improve your ability to handle risk during the course of your projects.
The article shows how to use decision tree analysis in project management as part of quantitative risk and decision analysis. Decision trees can be generated based on project schedules. It helps to make decisions during a course of a project. The article also explain a concept of value of information in project management.
Identifying which activities have the most affect on the project and understanding how activities are correlated with each other is important for establishing project priorities. Our judgement about correlation and causation is affected by a number of biases, such as illusory and invisible correlations, covariation assessment, and others. Sensitivity analysis helps to discover correlations within a project.
In this paper we will learn how to estimate probability and impact of the different events. We will also try to answer another question, what to do with them. Risk assessment is not trivial as it is subject to multiple mental errors. Among them are zero risk bias, loss aversion, ignoring base rate frequencies, gambler’s fallacy, overestimating the probability of compound events, and others. People’s response to risk and uncertainty varies due to the different risk attitudes of individuals and groups. Risk attitude measures how much risk an individual or group is willing to accept and is based on different factors, including emotions and biases.
In this paper you will learn how choice engineering can be used to improve corporate culture, and as a result, improve the bottom line of your company. In some most large companies, issues related to the corporate culture lead to disengaged employees and subsequent loss of productivity. You learn a few choice engineering tricks that will create a positive working environment for your team members, your boss, and yourself.
People often make poor choices because of illusions. At the same time, they don’t perform any analysis that would improve their decisions because of other illusions to which they are subject. Is there a solution to this problem? Establishing effective processes is always considered an effective way to improve project management. For example, if a project manager follows mandatory guidelines in time, scope, cost, risk management and other knowledge areas, this should improve the quality of the decisions made during the execution of the project and reduce chance of failure. But such processes are hard to implement, often expensive, and grudgingly followed if at all by some team members once they have been introduced. In many cases, especially for smaller projects, it would be more beneficial to create an environment within which people are encouraged on their own volition to make better choices, rather than mandate these choices. This is called choice engineering.
Structured analysis of the situation helps project managers to overcome illusions can improve their judgment. However, more likely than not, prior to making a decision people have not performed any structured analysis, or they misinterpret the results of the analysis. Complicating matters, sometimes the analysis is extremely complex and results may be incorrect. Even if the analysis is performed and is correct, often people do not realize its value. As a result, even now where we have highly trained experts with access to powerful computers, running the most advance advanced mathematical models, we still bear witness to the outcome of so many poor quality decisions.
Risk management become a critical component of project management processes. Quantitative schedule risk analysis methods enable project managers to assess how these risks and uncertainties will affect the project schedule. Event chain methodology is an uncertainty modelling and schedule network analysis technique that focuses on identifying and managing the events and event chains that affect projects. Event chain methodology improves the accuracy of project planning simplifying the modelling and analysis of uncertainties in the project schedules. As a result, it helps to mitigate the negative impact of cognitive and motivational biases related to project planning. Event chain methodology is currently used in many organizations as part of their project risk management process.
It is not uncommon to see good and experienced project managers make poor decisions that led to issues and eventually project failures. What is the explanation: misjudgement, lack of experience, or do some project managers just run out of luck? People make similar repeatable mental mistakes when they make choices, whether they are mothers trying to decide which is the fastest route to their children’s soccer match or managers of large companies who are trying to decide which design they should use for their next product launch. These illusions are a primary source of human error in project management, errors that can eventually lead to project failures.
Originally developed by ecologists, adaptive management has become a powerful framework for project management. It is a structured and systematic process to continually improve decisions and practices by learning from the outcomes of previous decisions. Adaptive management includes a number of organizational principles, such as iterative development and avoidance of irreversible decisions. Adaptive management relies of metrics and quantitative methods to integrate actual project performance to the management of projects.
Any projects are affected by a large number of events (risks), which can significantly change the course of a project. These events may form groups of related events or event chains. The event chains methodology can contribute to reducing uncertainties in project scheduling and significant simplification of process of modeling, tracking, and analysis of project schedule.
Quantitative Risk Analysis has become an important component of project management. Microsoft Project implements Qualitative Risk Analysis methodology. But what about quantitative analysis? Learn how to use Microsoft Project with third party tools to perform quantitative risk analysis.
Project management is the art of making right decision. Project managers are faced by huge array of choices. Should different supplier be used to improve the quality of a product? Should additional team member be brought in to improve the development performance? Learn how decision analysis process can be used on project management.
Formalized decision analysis process helps IT project manager to make a right decision. Learn how to use decision analysis techniques to mitigate negative impact to psychological biases and select most effective project decision.
Managing of risk and uncertainties during the course of a project has become one of the priorities of the software project manager. Event chains methodology is a practical approach to managing software projects that contain multiple uncertainties.