Risk Analysis

The term 'Risk' was only recently coined. In the past, we used the term uncertainty - or decision making under uncertainty. There are qualitative approaches such as the meetings mentioned earlier - and quantitative approaches such as monte carlo analysis. The idea is to evaluate and control areas of uncertainty in a project. There are some interesting theories in this area such as 'prospect theory' and 'rational choice theory' that might give you insight into how humans make flawed decisions. I would guess that others reading this risk forum would agree that one of the biggest challenges we face as planners  is convincing managers to alter their decision making style. For example, a single construction manager might frequently base decisions on one or two previous experiences in his career - and yet these few experiences are not statistically representative of the industry.

The term 'Risk' was only recently coined. In the past, we used the term uncertainty - or decision making under uncertainty. There are qualitative approaches such as the meetings mentioned earlier - and quantitative approaches such as monte carlo analysis. The idea is to evaluate and control areas of uncertainty in a project. There are some interesting theories in this area such as 'prospect theory' and 'rational choice theory' that might give you insight into how humans make flawed decisions. I would guess that others reading this risk forum would agree that one of the biggest challenges we face as planners  is convincing managers to alter their decision making style. For example, a single construction manager might frequently base decisions on one or two previous experiences in his career - and yet these few experiences are not statistically representative of the industry.

Hi Marcio.

In additon to what i have posted, Risk Analysis is important but you also need to focus more on the opportunities, this way you can offset delays if any.

Best regards,

Hi Marcio,

Performing risk analysis and mitigation measures is certainly a must on every project but certainly no guarantee to your planned schedule. There are things which are unforseen i.e. Acts of God, the recent economic meltdown for example, which originated in the US and affected a lot projects half way around the globe in Dubai and other parts of Asia.

I used to laugh at the MANCOM meeting when our Risk Manager starts identifying potential risks and a lot of them are just plain silly things like he was one of the 7 dwarfs character (very pessimistic) . But come to think of it...It can really happen when you least expected it. 

Best regards,

Daniel

Marcio,

One aspect is to identify which stake holders are driving the standard deviation of the end date probability distribution.

Marcio,



A good question.

I would think it depend on the type of project, the context of the project and the types of risks being analysed.



In other words both quantitative and qualitative methods would be used on most projects in an ideal world.



"Whato do u prefere:

qualitative analysis with effective actions or quantitative analysis with many questions?"



In my experience the really risky parts of projects I deal with are the intangible and immeasurable things. Hence I do my best to focus on “heading them off at the pass” (risk mitigation, contingency and avoidance) rather than trying to measure the unknown and intangible.



That said, in reality I find that the important risks which can be quantitatively analysed are done so formally and qualitative analysis is mostly done in an extremely informal way. I have done formal research on this. It is amazing how many project managers found out about a show stopper risk when they took the customer out for a coffee. During this research I asked an experienced project director what his primary risk management technique was and he replied: “[to] pick up the phone”. In other words he meant communicate with the customer.



What many good project managers do is arrive at a consensus about how much a risk something poses as early as they can by discussing it with the stakeholders, usually in an informal way. If the relationships are good, by simply discussing it in this way the risk is often minimised and ways to manage it are agreed to. You wont find this in the PMBOK but I have published formal rigorous research to prove it, not to mention my own and others’ experience.



Cheers,



Dave.

Dear Marcio,



I would do both by following the normal sequence of:



1. Risk Identification

2. Qualitative Risk analysis

3. Quantitative Risk analysis

4. Risk response planning.



A session with all the concerned would be helpful in identifying all the Risks that might happen.



Then we can create the Probability matrix and associate the importance to each and asses the impact



Quantitative Rish analysis is done using tools like decision trees and calculating the monetary values.



Of course, we need to monitor all the risks throughout the project and take the necessary action when it occurs.



Best,



Samer

Dear Marcio,



The objective of the Risk Analysis is to increase the probability and impact of positive events and decrease the probability and impact of negative events.



Good luck,



Samer

risks are unknown always and we have to take all precaution in our plan to deal with the risks(accept,transfer,mitigate........etc).



we have to prepare risks plan and risks resopnce during the planning stage in order to deal with the risks.



is there any method or sysytem to reuce the risks level for example from high propabality of repeatition high impact to medium propabality of repeatition and medium or low impact.

I agree with Clive (#4). If you don’t have a good relationship with the client your schedule isn’t going to matter much. If you do have a good relationship you have far more risk management options.

After that the biggest threat to the schedule is the unknown. Hence risk identification may be vital.

Hi Marcio,



It is great correspondence ;-)

- 1st post - year 2004

- 2 question - year 2005

- 3 my answer .... year 2008 ;-)



In my smart sentences :-) "fedback" is need to change (or possibility) assumptions of analysis. F.e. if risk is big we can change durations, sequence, resources or another factors of risk. This feedback is not element of risk analysis in most detail level, but it is element of risk management in most general level.



Sorry for delay, very sorry :-) for my longterm feedback. 3 years is very, very long time. We are older.



all the best for all

Tom

Hi,



can we continue our valuable discussion about risks during

Project Life Cycle and the risk analysis which deals with identification and analysis of risk related to different aspects involve in the project life cycle.

Hi Marcio Eduardo



In generally risk analysis and impact could not guarantee. In a strategic or project briefing stage that first risk analysis should start. This can do varies methods such as brainstorming, Questionnaires, interviews, etc.

After that risk can identify in LOW, MEDUIM and HIGH with quantitative and Qalititative manner.

These risks could varies in project life cycle in strategic, Tactic, Operational and Maintenance, Demolished stages and should be evaluate and update risks. Therefore risk analysis subject to variation and impact shall be changed.



Jayaweera

Hi,



Risk analysis in form of "schedule sensitivity" analysis. If we modify "something" in effect of schedule analysis - it is factor of guarantee but without any reaction we have only knowlegde, i.e. information only.



Risk analysis is ONLY analysis - so we need fedback after risk analysis. It is real quarentee (if changes are good). Important problem is "good model" for risk analysis, because assumption related to bad model can be dangerous or "dezinformation".



all the best for all

Tom

As what we plan is to happen in the future, and none of us have crystal balls, there will always be the risk of the unexpected.

Marcio ,GOOD LUCK

Hi,

*Risk analysis is a part of the risk management process.

*Risk management planning is a part of planning process group.

* Risk management planning procss is important to ensure that the level,type and visibility of risk mansgement are cmmensurate with both the risk and importance to the project to the organization,to provide sufficient resources and time for risk management and it shall be completed early during the project planning.

*Risk response planning is the process of developing options and determining several actions to enhance and reduce threats to project objectives.

*Stratigies for nigative risks;

Avoid

Transfer

Mitigate

Accepte

Share

Enhance

Exploit

Hi



All a risk analysis will give you a good idea of how the schedule will possibly "perform", as for a guarantee, no such thing as guaranteee in the real world.



John