Project management

New Edition of Book “Risk and Decision Analysis in Projects”

riskanddecisionanalysisinproject3edcoverJohn R. Schuyler delivers a wholly rewritten and expanded successor to the best-selling prior editions of his book.

Decision analysis provides assistance in making logical, consistent decisions under uncertainty. This book instructs readers in applying decision analysis to a wide range of project decisions. An essential concepts and how-to guide intended for serious Project Management students and practitioners, the scope of the book is quantitative analysis, from project inception to post-project review. The entire asset life cycle is covered, from an initial feasibility analysis, to the project plan, to the post-project review, and on to a look-back analysis of the capital investment decision.

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Patrick Engineering Uses @RISK for Cost and Schedule Risk on MBTA Project

PatrickEngineeringPatrick Engineering, a nationwide U.S. engineering, design, and project management firm, provides independent cost estimating, scheduling, and risk analysis services for the Massachusetts Bay Transportation Authority (MBTA). Given the uncertainty of cost and schedule duration estimates, the best way to display them is with probability distributions. Patrick Engineering uses @RISK to assess cost and schedule contingency needs based on project or program risks.

Patrick worked on the Downtown Crossing Vertical Upgrade project recently, part of the MBTA’s program to upgrade elevators and meet accessibility requirements of the Americans with Disabilities Act. The first step for the project was risk identification. “To do this, you need to work collaboratively with the client, with the designers, with the project management team, with anyone who will have insight into the project – you want them all involved,” explains Kim Kozak, Sr. Project Manager for Patrick Engineering. The full team for the Downtown Crossing station project included six organizations and approximately 20 team members.

From here, Patrick Engineering holds a Quantitative Risk Workshop with all the players. “We try to get people thinking, to encourage discussion, as even a small detail could lead to a giant risk,” said Kozak. “Similar to the situation with the Titanic – what seems like a minor detail could be enough to sink the entire ship.”

“The final results of Palisade’s @RISK models help us, and our clients, understand where projects could go – not where they will go,” explained Kozak. “And we know that if a risk does occur, we’re well prepared as we’ve already identified it.”

» Read the Full Case Study

Project Manager Today’s In-Depth Review of @RISK Professional

PMToday_flProject Manager Today took an in-depth look at @RISK Professional in a 4-page article in July.

“All projects involve risks, but it’s vital to understand what those risks are and how they might affect your budget and schedule,” explains author Steve Cotterell. “@RISK is a well-established software tool that’s been designed to help you do that.”

What follows is a thorough review of features, with helpful screen captures as illustrations. The piece serves as a nice introduction to @RISK, demonstrating how project managers create models to mitigate uncertainty, all within Excel!

» Read the full @RISK Professional Review

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.

Reviewing Risk for South Africa’s Rail, Port, and Pipeline Projects

Transnet Turns to @RISK to Evaluate Capital Projects Risk in South AfricaManaging the delivery of all necessary goods within a country is not a simple task. It can require the careful coordination of ships, ports, railways, and pipelines to ensure that citizens, no matter where they are, get the goods and services they need. Expanding this system to accommodate more people and growth can be a daunting task, and requires careful analysis of the potential risks that could threaten the schedule, cost, and efficacy of the project.  Transnet, the primary freight logistics company in South Africa, relied on @RISK to assess the expansion of their infrastructure, using the software to better understand the risks that might arise during large-scale and complex capital projects.

Francois Joubert, National Program Risk Manager with Transnet Capital Projects (TCP), was charged with determining the key risks across the different projects in the TCP project portfolio. “It is a complex project environment…A project can be a like-for-like replacement, requiring a team of three people, costing less than $465,000, and have a duration of three weeks,” says Joubert, “or it can be a port infrastructure project with multiple stakeholders, costing $558M, involving 150 people, and requiring complex engineering and procurement which takes five years to complete.”

Using @RISK, Joubert was tasked to use the TCP’s  existing risk registers and identify the following:

  • Where in the risk break–down structure and project type do the most significant risks appear?
  • In which risk types and project types do the most significant risks appear?
  • What is the influence of project start delay risks on the project portfolio?

“Using specific @RISK functions…combined with a whole range of Lookup and SumIfs statements, some named ranges, and with conditional formatting, I was able to build a representative model,” Joubert explains.

The results have been presented to Transnet and are going to be used to identify the root causes of these portfolio risks.

Joubert says that Palisade software made this project possible. “It’s an excellent decision-making tool; it provides scientific, defendable numbers for contingency, risk ranking, etc.,” he says. “There are too many useful features to count—but its flexibility of use, particularly because it is Excel based—may be the most valuable.”

Read the full case study here.

@RISK Models Public Transit Expansion in Edmonton, Alberta

Edmonton The Canadian city of Edmonton, Alberta, is expanding their public transportation, known as the Light Rail Transit (LRT) system, from just one line to a network that connects all sectors of the city.

Of course, projects like these are expensive—anywhere from $200-$800 million—and come with considerable uncertainty. To deal with this, the City brought on a team to help them hone in on the costs and risks associated with the project, with a goal of greater cost and schedule certainty. As part of that team, SMA Consulting’s Risk and Project Controls Manager Jesse Kostelyk was tasked with estimating the potential costs and analyzing the uncertainties involved in the project. To do so, he turned to @RISK.

@RISK allows for the project management modeling that Kostelyk and SMA Consulting need, enabling them to estimate the impact of various risks on the cost and schedule of the project. Thanks to @RISK’s integration of Microsoft Project schedules with Microsoft Excel models, the consulting team could manipulate schedule inputs and then observe how those changes would affect the budgetary outcome of this important, multi-million dollar project. The result was a much more objective, precise view of the scope of the LRT expansion for decision-makers.

By leveraging the spreadsheet environment as an interface to a project schedule, @RISK enables modeling flexibility that was never possible in Microsoft Project alone.

“@RISK’s ability to integrate models in Excel and Project opens up a world of possibilities for capturing and quantifying construction project uncertainty,” reports Kostelyk. “At SMA Consulting, it’s our go-to program for risk analysis.”

After running the risk analysis using Monte Carlo simulation, the project managers were able to bring their results to the Edmonton City Council and present them with a defined cost range. “They are asked how much risk are you willing to take to move this project forward,” says Kostelyk, “and then we can quantify how certain we are about how much it will cost.”

Accordingly, the project team decided to choose a budget at the 85th percentile of certainty, which, when the construction contract was awarded, was within 2% of the winning bid. Thanks to @RISK’s integration of both schedule and cost concerns, the Edmonton LRT project began on solid financial footing.

Read the full case study here.

Major Corporations Lack Risk Management Strategies

Even the largest and most successful businesses have something to learn when it comes to managing risk.

Companies are working harder to identify potential risks to their business, but many still fail to incorporate those risks into strategic plans or inform the board of directors,” writes Wall Street Journal senior editor Emily Chasan.

In her article appearing in July 3rd edition of the WSJ’s CFO Journal section, Chasan discusses a survey of 100 senior financial executives done by APQC, a nonprofit business research firm.

The survey found that fewer than one in five executives say their companies effectively manage newly identified strategic risks, with most companies failing to implement procedures to lessen risk.

Two out of three companies in the survey (which included large public and private companies with global operations) said they do not have a process for ensuring that strategic risks are included in the company’s strategic plans, while 43% reported to not have an established method for reporting risk to their board.

Risk management software enables companies to take the guesswork out of big decisions and to plan strategies with confidence. Tools like Palisade’s @RISK are used across industries to identify and minimize risk.