PLANNING STAGE (RISKS) : PERFORM QUANTITATIVE RISK ANALYSIS

This is a forth process of planning risks whereby the identified risks which have been prioritized through perform qualitative risk analysis, are analyzed their effects on the project numerically. This helps to make the best decision for the purpose of reducing project uncertainty.

The inputs of the process are:

• Risk Management Plan which explains tools, methods and guidelines to use for quantitative risk analysis.
• Cost Management Plan which provides guidelines on how to establish and manage risk reserves in terms of cost.
• Schedule Management Plan which provides guidelines on how to establish and manage risk reserves in terms of time.
• Risk register which provides the list of risks to be used for quantitative analysis.
• Enterprise Environmental Factors which provide related insights from risk specialists, risk databases and other sources.
• Organizational Process Assets which provide risks information from the previous projects

The followings are the tools and techniques to use in order to perform quantitative risk analysis:

• Data gathering on the optimistic, pessimistic and most likely scenarios through interview and represent them to determine the three point estimates in the common used distribution. The distribution can be in form of Beta (with two shape parameters) or Triangular. These probability distributions are used to represent the uncertain events in values such as duration and costs of the project activities.
• Quantitative risk analysis and Modeling techniques. These are
• Sensitivity analysis which helps to determine which risks have the most potential impact on the project and how they correlate each other
• Expected monetary value analysis which calculates the average outcome by multiplying value of possible outcome (Threats in negative value while Opportunities in positive value) with its probability of occurrence then add them together. This analysis creates a decision tree diagram. See an example of decision tree diagram.
• Modeling and simulation whereby Monte Carlo is used to simulate the computed project model with input values chosen at random.

• Expert judgement whereby experts determine the specific tool to use according to the organization capabilities and culture in order to identify the potential cost and schedule impacts as well as to evaluate probability.

The output of the process is updated risk register with prioritized list of quantitative risks, tends in quantitative risk analysis result as a report as well as probability of achieving cost and time objectives.

Reference:

PMI (2013). A Guide to the Project Management Book of Knowledge (PMBOK Guide 5^th Ed.) USA, Project Management Institute