Project Risk Management: Essential Methods for Project Teams and Decision Makers

CHAPTER THIRTEEN

Preparations for Probabilistic Analysis

Questions Addressed in Chapter 13

• What are the main goals of probabilistic analyses?
• What is the method statement in probabilistic analysis?
• What is the high-level workflow in probabilistic analysis?
• What factors influence the duration of probabilistic analysis?
• What is the typical specification of inputs to probabilistic models?
• Why must correlations never be forgotten?
• “Probabilistic analysis? What do you mean by that?”

THIS CHAPTER IS DEVOTED to the steps in getting prepared for probabilistic risk analysis. The typical workflows of cost and schedule risk analysis will be outlined. Specifications of required input data will be introduced.

TYPICAL WORKFLOWS OF PROBABILISTIC COST AND SCHEDULE ANALYSES

Four major goals of probabilistic cost and schedule analyses are:

1. Investigation of confidence levels of planned or sanctioned project budgets and completion dates

2. Development of cost and schedule reserves to ensure the required or comfortable confidence level of total project costs and completion dates

3. Identification of the most sensitive general uncertainties and uncertain events for their further addressing, allocation of cost and schedule reserves against them, or optimization of baselines

4. Running and investigation ...