Risk Assessment Process-1
Risk Assessment Process-1
Risk Assessment Process-1
Agenda
Risk...
Dictionary defines risk as . . .
possibility of loss or injury;
a dangerous element or factor.
Project risk is defined here as
an unexpected event or
circumstance that has a chance
of occurring and that may
prevent a project from meeting
Most Likely
Cost
Actual
Cost
Most Likely
Cost
Most Likely
Cost
Cost range
Conceptual
Planning
Alternatives
Analysis
Preliminary
Engineering
Final
Design
Bid
Construction
Types of Risk
Budget Risks:
Event Risks:
Scope Risks:
Risk Prioritization
1. Validation of Base
Conditions
3. Assessment (Modeling)
6. Implementation/
Monitoring
5. Risk Mitigation
Planning (RMP)
4. Discussion/
Review
Base Costs
LIKELIHOOD
(PROBABILITY)
Total Costs
(Risk + Base)
Risk Costs
Example of Risk
Register
Each cost estimate line item and each risk item is assigned a
probability curve.
Probability curves are chosen by evaluating the behavior of each risk
item.
Probability curves whose parameters can easily be understood and
estimated by project participants are preferred.
Commonly-used distributions are shown here. Clockwise, from top left:
Cumulative, Triangular, Exponential, Discrete, and Pert probability
distributions.
Different Technical
Methods for Quantifying
Risks
Simulation or Modeling Methods (Monte
Carlo) Appropriate for:
- Evaluating Complex Projects and Risks
- Integrated Cost and Schedule Assessments
- Dynamic Critical Path Schedule
Different Technical
Methods
for Quantifying Risks
Non-Simulation Methods (Expected
Value and Variance, PERT) Appropriate
for:
- Risks are Not Complex; Events are
Independent
- Cost or Schedule Assessment
- Stable Critical Path Schedule
- Current Year or YOE Cost Estimates, but not
Dynamic Escalation Effects
100
90
Probability of Underrun (% )
80
70
60
50
40
30
20
There is a 10% chance
that the cost w ill be less
than 373.3 m illion
10
0
$420,000,000
$410,000,000
$400,000,000
$390,000,000
$380,000,000
$370,000,000
$360,000,000
$350,000,000
$340,000,000
5/17/09
3/28/09
2/6/09
12/18/08
10/29/08
9/9/08
7/21/08
6/1/08
4/12/08
Cumulative Probability
Findings: Schedule
Assessment
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
PROJECT
RISK
RISK
MITIGATION
Management Action
Contracts
Insurance
Contingency
Risk Mitigation
Strategies
Management Action:
Contracts:
Insurance:
Contingency:
Risk
Mitigation
Action
Strategy
Reestimate project cost during preliminary engineering.
Type
Management Action
By
Grantee
Management Action
Grantee
Management Action
FTA
Management Action
Grantee
Grantee
Detail
Cost impacts due to deviations from estimate quantities,
1
productivities, and unit prices.
Mitigation
FTA
FTA
Grantee
Effect of Mitigation on
Total Cost Variances
PROBABILITY
Project Cost,
Unmitigated
Completed:
In Progress: