@RISK Modeling Tips
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Project Risk Assessment
Decision-Making and Quantitative Risk Analysis using @RISK
Embracing Risk Management in the
Palisade Global Risk Conferences Advance Best Practices in Risk Management
Some examples include:
Upcoming Palisade Risk Conferences include:
Accenture, Others Note Need for Better
Palisade sees the same trend, with more and more companies in the minerals sector demanding sophisticated, yet easy-to-use quantitative risk solutions like @RISK. The topic spans other sectors involving mega projects as well, such as oil and gas, infrastructure (see Case Study section of this newsletter), aerospace, and defense. The scale and complexity of multi-billion-dollar projects means that risk cannot be ignored. Just a few companies in the mining sector who have publicly given recent talks or workshops on the topic at Palisade events include Collahuasi in Chile, Promon Engenharia in Brazil, Anglo American Kumba Iron Ore in South Africa, and Vale in Brazil.
Fortunately, @RISK’s Monte Carlo simulation is a great tool for understanding the various possible outcomes in any megaproject, and their probabilities of occurrence. With this information, project leaders can better understand the chances of going over budget or of missing deadlines, and what to do about it. @RISK identifies not only what the risks are, but what is driving them, enabling managers to set contingencies and make smarter decisions.
» Read a case study about a defense-related megaproject using @RISK
Public bodies including the FTA are expecting confidence levels of 70-80% and sometimes higher for project completion estimates. @RISK aids in identifying inherent confidence levels. As respective confidence levels are compared to preliminary budgets and schedules, contingency and schedule float are thus evaluated for sufficiency.
According to Dan Estrada, Project Manager for Gannett Fleming, “@RISK facilitates an integrated approach to quantifying schedule and cost risks and offers concise evaluations of their potential impacts. The software allows us to confidently address FTA requirements.”
@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.
Introducción al análisis de riesgo y decisión con
Introduction a l’analyse des Risques et décisions
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