3. High-level risk assessment
• Risk assessment
• Some examples
– Example 1: £4bn, 6 years
– Example 2: £5bn, 5 years
– Example 3: £50m, 1.5 years
– Example 4: £50m, 1 years
– Example 5: £50m, 0.5 years
• Level of detail
• Logic / complexity
• Correlation
5. Ways to assess risk
• Techniques to help assessment
Credit: from Centrica Energy’s PACE guidelines.
6. Quantitative risk assessment
• Never been done before
• Challenging conditions
• Uncertain regulations
• Early phase
• Been done before
• Easy conditions
• Established regulations
• Mid-execution
P10
P50
P90
Base
P10
P50
P90
Base
• “Cheaper but
more risky”
• “More expensive,
less risky”
7. Quantitative risk assessment
• Given the risk as we have expressed it:
– How much overall contingency is likely needed?
– Where is it likely needed?
– And when?
– What’s our biggest risk at P50?
– At P90?
– What contractual incentivisations are appropriate?
– How valuable is response x?
13. Example 2
• Rolling up risk
– We heavily rolled up the offshore hookup work.
– Mid-execution, when the hookup work had more detail, we used
the summary curve of the detailed hookup progress data, to
inform the risk assessments on our high-level bars.
14. Example 3
• ~£50m, ~18 months
• 1,600 activities
• Challenges:
– Inconsistent level of detail
– Planned in hours, not days
– Unrealistic logic
– Two distinct projects in P6, with duplicated
common activities
17. Example 3
• Master execution schedule had 1,600 activities.
• We managed to prune it down to 900, by:
– Removing activities in the past
– Dissolving milestones
– Rolling up sequential work
18. Example 4
• ~£50m, ~1 year
• 500 activities
• Challenges:
– Planned in hours, not days
– Schedule logic quality
• We “rolled up” to 112 activities
• 40 cost lines
22. Example 5
• Semi-qualitative scoring
TYPE
IMPACT
LEVEL
DEFINITION
1
Green
(low)
High Confidence of achieveving within 5 days of
Forecast Milestone
2
Amber
(medium)
Confidence level with in 6 to 25 days delay to
Forecast Milestone
3
Red
(high)
> 25 days delay to Milestone
1
Green
(low)
Less than 25% probability
2
Amber
(medium)
Between 25% and 75% probabiilty
3
Red
(high)
More than 75% probability
PROBABILITY
CRITICALITY
SCHEDULE
26. Logic challenges
• Too much schedule detail
• Finish-driven logic
• Different calendars
• Too much cost detail
• Too much risk detail
27. Logic solutions
• “Roll up” activities and logic
– Use leads / lags
• Use forward-driven logic
– Use “stretching” (aka “non-contiguous scheduling”)
• Simplify calendars
– Aim for none at all, except windows / seasons
• “Roll up” costs
– Spread over hammocks
• Try and simplify risks
– Combine risks, focus on significant risks
28. Uncorrelated risk impacts
• Overall probability vs individual probabilities
– Individual probability 𝑝:
– Where:
• 𝑃 is the overall probability
• 𝑛 is the number of impacts
𝑝 = 1 − 1 − 𝑃
1
𝑛
29. Uncorrelated risk impacts
• Example: Risk of equipment delay
– Impacts three procurement activities
– Impacts are uncorrelated
– Overall probability is 60%
Risk with uncorrelated impacts
Overall
probability
Number of
impacts
Chance of at
least one
impact
Chance of
no impacts
Chance of
not each
impact
Chance of
each impact Notes
001 Equipment delay 60% 3 60.0% 40.0% 73.7% 26.3% Probability was assessed as overall chance
… …
30. Distribution shapes
• Use the uniform distribution, or better
Single value 1-point estimate
More knowledge /
less uncertainty
Beta Pert
(larger shape parameter,
default shape parameter of 4)
3-point estimate
Triangle / Trigen 3-point estimate
Beta Pert
(smaller shape parameter)
3-point estimate
Uniform 2-point estimate
Less knowledge /
more uncertainty
Credit: from Centrica Energy’s QRA training manual
40. High-level risk assessment
• Summary
– Keep perspective
– Keep high level
– Balance correctness and manageability
• Big project with …
– … a few big activities, a few big costs
– … lots of activities, lots of costs
• Care with words!
– “High-level assessment” vs “high level of detail”
– “Bring forward” vs “go forwards”