Presenting the results of a Monte Carlo simulation can be challenging when your audience isn’t inclined to receive probabilistic information. Decision makers often want a single number for net present value, project completion date, or profit. How do we as the modeler/analyst present this information so it is understood and appreciated for the extra information …
In this article we are going to discuss using Monte Carlo simulation to perform quantitative risk analysis for project management. The three primary risks to a project are schedule, financial, and technical. Two of these three risks readily lend themselves to be quantified with Monte Carlo simulation: schedule risk and financial risk. If you’re unfamiliar …
Quantitative Risk Analysis for Project Management Read More »
Determining project schedule risk through simulation can be achieved by constructing a critical path model in Excel. This might sound tedious, especially for large projects, but we will walk through the process and show that it’s pretty simple. Simulating a critical path model is worth the effort and was discussed in a previous article. We’ll …
Decision making under risk and uncertainty is a fact of life. There are many ways of handling unknowns when making a decision. We will try to enumerate the most common methods used to get information prior to decision making under risk and uncertainty. We’ll also look at decision rules used to make the final choice. For …
When we try to estimate a project completion time, often the temptation is to use a best guess completion time for each task, find the critical path, and add up the times. This method lacks information about the project schedule risk, and if done honestly, often results in a finish time later than the due …
Exposing Project Schedule Risk Hidden in Best Estimates Read More »
An important part of managing a project is project risk management. Not identifying and managing risks can take down a project in short order. Therefore, risk management should be done for all but the most trivial projects. Even if we are willing to accept a given risk level in order to take advantage of an …
As part of risk management, a project risk analysis is performed to assess the impact of risks and the probability of the risk occurrence. In this article we will look at the differences between qualitative and quantitative project risk analysis. To see how project risk analysis fits within risk management, please refer to this article. …
Qualitative vs. Quantitative Project Risk Analysis – What’s the Difference? Read More »
Risks are everywhere. It’s a wonder that anyone leaves their house each morning to venture into the world, or to venture into projects and investments. In this article we will look at the meaning of risk. There are many definitions of risk depending on the context, or industry. Also, risk is frequently used as a …
Project critical path analysis can be performed using Monte Carlo simulation as a way to determine project completion time probabilities. In this article, we will create a network diagram in Excel and a table to perform necessary logic operations. We will assume that each task follows the PERT distribution (also called Beta-PERT). Using past experience, …
Mind maps are a useful way to organize information and to gather input from a group. A mind map is simple to construct and is really an organized way of collecting your (or your group’s) thoughts. By visually mapping out a problem, project tasks or set of ideas, you are engaging a different part of …