Corralling Costs Down Under

Using Monte Carlo simulation in project planning has proven to save time and money, yet many organizations still rely Corralling Costs Down Underon less effective methods to mitigate risk.

Dr. Stephen Grey and his colleagues at Broadleaf Capital International in Cammeray, Australia, have spent decades helping steer clients towards sound methods of planning projects, from deciding where to invest to ensuring that plans and estimates are realistic before commitments are made.

Quantitative analysis  is extremely powerful, especially in the later stages of planning and for a final investment decision. Clients come to Broadleaf either well-aware that they need a risk analysis conducted on their project, or “we get clients who are in difficulty and don’t understand why,” says Grey. “Once they see there’s a way to get a grip on uncertainty, they’re very keen to do that.”

Grey explains that for many institutions and businesses, quantitative evaluation, particularly of cost contingency, has become stuck using outdated methods.

His theory is that project size and complexity took off much faster than computing power could keep up with. Thus, methods well suited to manual calculation were automated without being altered, rather than being updated and improved as computing power became available.

Using @RISK, Grey and his Broadleaf colleagues have helped clients, such as one of the major mining companies in Australia, the Government of New Zealand, and the UN-affiliated International Organisation for Migration, to more accurately evaluate and plan for risks on major projects.

Grey says that Palisade software has been his tool of choice from the very beginning. “I started with @RISK in the 1980s and stayed with it,” he says. “Its rich modelling environment allows me to represent uncertainties in terms that are meaningful to the project personnel so that information can be gathered from them and used in a model in exactly the same terms. This helps them engage with the exercise and means they understand the results we produce and use them to make informed decisions.”

 

Read the full case study here.

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