The APM Risk SIG presented a Quantitative Risk Analysis event on 11th February 2016 that provided perspectives across the project stakeholder spectrum, from client decision-makers to risk analysts and consultants.

1. QRA throughout the
project lifecycle
Val Jonas
Risk Decisions Group
11th February 2016

2. © Risk Decisions 2016, Predict!™
Agenda
 Calculate the project budget
 Cost QRA
 Schedule QRA
 Set baseline targets and performance measures
 QRA throughout the project lifecycle
 Baseline risk tracking
 Summary

3. © Risk Decisions 2016, Predict!™
Agenda
 Calculate the project budget
 Cost QRA
 Schedule QRA
 Set baseline targets and performance measures
 QRA throughout the project lifecycle
 Baseline risk tracking
 Summary
 Calculate the project budget
 Cost QRA
 Schedule QRA
 Set baseline targets and performance measures
 QRA throughout the project lifecycle
 Baseline risk tracking
 Summary

4. © Risk Decisions 2016, Predict!™
Distributed +
Undistributed Budget
Negotiated Cost 610k
Emergent risk
Baseline (Work)
Risk budget held at programme level
(on behalf of the project)
Project risk budget
Project level
Identified risk
The project budget
Management Reserve (MR) is an amount of budget set aside to handle risks (proactively and reactively)

5. © Risk Decisions 2016, Predict!™
Schedule Reserve
Completion date
Budget
Identified risk
Baseline
(work)
X
0
12,000
24,000
36,000
48,000
60,000
72,000
84,000
Emergent risk
Jan 2018 Feb 2018 Mar 2018 Apr 2018 May 2018 Jun 2018 Jul 2018 Aug 2018 Sep 2018 Oct 2018
Schedule
uncertainty
Schedule
reserve
Contract
milestone
buffer

6. © Risk Decisions 2016, Predict!™
(Note the tail)
Baseline setting: Cost QRA
+ Uncertainty
+ Risk factors &
events
Actions
+
=
Cost model (work)

7. © Risk Decisions 2016, Predict!™
Baseline setting: Schedule QRA
Project schedule
e.g. MS Project, Primavera P6
+
Clean up the schedule
+ Task
Uncertainty
Actions
+
+ Risk factors &
events
(Two major
risk scenarios)

8. © Risk Decisions 2016, Predict!™
Understand Risk Management focus
Baseline your risk register and establish responsibility
– risk events (threat & opportunity), risk scenarios, risk factors …
… mitigation and response actions

9. © Risk Decisions 2016, Predict!™
QRA is an iterative process
 First pass usually results in an “unacceptable” result
 Management pressure to reverse engineer
 Reality that cost/time/scope must be traded
 Have opportunities been considered?
 Involves involvement from multiple disciplines
 Accumulate sound risk information
 Create a representative model to combine the data
 Allow repeat ‘what-if’ scenarios to be evaluated

10. © Risk Decisions 2016, Predict!™
Agenda
 Calculate the project budget
 Cost QRA
 Schedule QRA
 Set baseline targets and performance measures
 QRA throughout the project lifecycle
 Baseline risk tracking
 Summary

11. © Risk Decisions 2016, Predict!™
The decision making process
 Business case and approvals
 Present possible outcomes and scenarios
 Consider alternative options
 Reality check
 What is the organisation’s risk appetite?
 Does the project fit within the business portfolio?
 Managers make final decision

12. © Risk Decisions 2016, Predict!™
Baseline the residual risk position
Approve an action to
mitigate a threat,
exploit an opportunity
or recover from
realised risk
Transfer work
and budget
into the baseline
Baseline
(work)
Time
Cost
Realise an
opportunity, reject
a risk

13. © Risk Decisions 2016, Predict!™
Set the Contract Budget Baseline…
…based on
QRA results
informed by
Risk Appetite
Time
Cost
Residual risk
position: depends on
how aggressive you
set your baseline
(how much
measured
uncertainty and risk
you decide to ‘take’
Baseline
(work)

14. © Risk Decisions 2016, Predict!™
Set specific (monitoring) targets
Deterministic: 28th March
Working:14th May
(50% confidence)
Contract: 31st July
(90% confidence)
!!! Watch this
scenario

15. © Risk Decisions 2016, Predict!™
Agenda
 Calculate the project budget
 Cost QRA
 Schedule QRA
 Set baseline targets and performance measures
 QRA throughout the project lifecycle
 Baseline risk tracking
 Summary

16. © Risk Decisions 2016, Predict!™
Project progress: How well are you doing?
 Monitor MR usage
 Identified risk
 Emergent risk
 Understand your significant risks
 Review existing and identify emergent risk
 Track confidence via regular QRA
 Working target (e.g. at 50% confidence)
 Contract deadline (e.g. at 90% confidence)

17. © Risk Decisions 2016, Predict!™
Tracking over time
Q1: 50% 90%
Q2: 40% 89%
Q3: 34% 90%
Q4: 14% 90%
Q6: 8% 81%
Q7: 0% 34%
Q5: 13% 87%
Q8: 0% 0%
28th Mar 31st Jul
Q9: Complete
25th Sep 2018
14th May

18. © Risk Decisions 2016, Predict!™
Keep reviewing Risk Management focus
Have the key risks changed … continue to review the ongoing
threat to the project …

19. © Risk Decisions 2016, Predict!™
QRA throughout the project lifecycle
 Track how confident you are of achieving the
 working date
 contract date
 Are you confident that you have sufficient budget?
 Are you keeping a watch on key risk events and drivers
 Repeat QRA to evaluate changes

20. © Risk Decisions 2016, Predict!™
Agenda
 Calculate the project budget
 Cost QRA
 Schedule QRA
 Set baseline targets and performance measures
 QRA through the project
 Baseline risk tracking
 Summary

21. © Risk Decisions 2016, Predict!™
Project lifecycle QRA – the benefits
 Early warning system
 Timely corrective action
 Increased management and customer confidence
 Continually re-assess the most important risks
 Focus mitigation activity on most beneficial areas
 Understand the impact of emergent risk
 Understand change (risks happen / are retired)
 Return Management Reserve to margin / other projects

22. © Risk Decisions 2016, Predict!™
Summary
 QRA is for the whole project lifecycle
(not just bid / business case stage)
 Set & trace performance targets
(working and contractual)
 Use systems to ensure consistent risk information is
available for regular QRA modelling
 Keep it simple … make it repeatable

23. © Risk Decisions 2016, Predict!™
Questions
www.riskdecisions.com
val.jonas@riskdecisions.com +44(0)7831 881297
trevor.jay@riskdecisions.com +44(0)7595 206805
Contact details:

24. © Risk Decisions 2016, Predict!™
Interfacing Risk & Earned Value Management
ISBN- 10: 1-903494-24-9
ISBN- 13: 978-1-903494-24-0
https://www.apm.org.uk/InterfacingRisk

25. This presentation was delivered at
an APM event
To find out more about upcoming
events please visit our website
www.apm.org.uk/events