Project Risk Management

RISK MANAGEMENT SOLUTION: EXAMPLE

Single family home construction project

Project Risk Management with Risky Project: Example

1. Create project schedule. 

The original (baseline) project has 93 tasks. They represent all the activities starting from the awarding of the contract and finishing with the final walk-through. Some tasks have the constraint "Must start on".

Other tasks, for example "Review Bids", have deadlines.

click to enlarge

2. Assign risks and uncertainties

Global risks (seen in the Global Risk View) are created based on a generic risk template. These risks are applied to all tasks or resources. They include potential natural disasters, budgetary problems, and potential changes based on client requests.

Local risks are assigned to the specific tasks or resources. For
example the task "Secure financing" has the risk "Delay with financing". The resource "Concrete subcontractor" has the risk "Low qualification of the subcontractor". This risk will cause a delay for the task(s) that this subcontractor is involved in.

For some tasks we know, based on our previous experience, that task duration will be within a certain time period. For
example, the task "Framing Second Floor" can be completed between  10 and 17 day. Uncertainty is defined using a triangular distribution.

click to enlarge

3. Calculate and analyze results

You click on the Calculate button to perform a simulation. Results of simulations for the whole project are presented within the Project Summary view. The table shows that without
risks taken into account, the project duration will be 199 days. However, with risk and uncertainties it will be between 199 and 304 days (mean is 232 days).

Using the charts at the bottom of the view, you can determine
the likelihood of a project finishing before a certain date. For example, by moving the slider you can see that there is an 82% chance that the project finish time will be earlier than July 14.

Go to the sensitivity view and you will see all critical risks. In this example you can see that the risk having the greatest impact on the project schedule is the global risk "Changes based on client's request". The success rate of the project is 100% because you do not have risks which would cause cancellation of the project. Go to the critical task view and you will see tasks, which affect the project duration the most, based on results of the sensitivity analysis.

click to enlarge