Project Risk

@RISK for Cost and Schedule Risk Using Risk Registers (with Example Model)

@RISK can be used in conjunction with MS Project and Excel to model the schedule and cost risks inherent in large, complex projects. This example demonstrates the use of @RISK to build a complete model of the construction of a new commercial venue. The model includes uncertainty in task times, a Risk Register for calculating contingencies, and a link to real-time cash flows in an NPV calculation model.

@RISK probability distributions have been assigned to the durations of several tasks in the schedule, some with a distribution and others using Risk Categories. The uncertain task times are assumed to be uncorrelated.

A Risk Register lists three possible risk events that could impact the project schedule and costs. By using the RiskProjectAddDelay function, these risks introduce schedule delays and associated costs. Specifically, this function allows the model to generate new tasks dynamically, depending on whether the risks occur or not. Changes are reflected at run time only, so it is necessary to run a simulation to see the impact and results of the Risk Register.

The example also contains a model of cash flows that leads to the NPV of the project. In particular, the project costs create a Timescaled Data report. This collects the total cumulative costs during a simulation. After a simulation, you can see the total cumulative costs for the project as they grow over time.

The other reports generated are the NPV and the Contingency for the Risk Register, at different confidence levels. Finally, the cash flow also includes a Revenue Adjustment calculation that takes the portion of the year in which Sales are initiated and applies a discount to the predicted annual revenue.

» Download the model (Requires @RISK 6.x Professional or higher, Microsoft Project must be installed.): XLSX fileMPP file
» Download a trial of @RISK Industrial

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

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.