Online Webinar – Recorded September 19th 2013
Activity Type: Education – Online or Digital Media 1 PDU Free
By: ProjectManagement.com / Gantthead (REP #2488)
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Identifying the root causes of project schedule and cost risk requires that the risk to the project schedule is clearly and directly driven by identified and quantified risks.
In the Risk Driver Method the risks from the Risk Register drive the simulation.
As a side note, Risk Registers are not complete – during the interviews to collect risk data the interviewees introduce important risks that are, surprisingly, missing from the Risk Register.
The Risk Driver Method differs from older, more traditional approaches in which 3-point (low, most likely and high) estimates of the activity durations are applied directly to activity durations.
The traditional 3-point estimate represents, often, the influence of several risks that impact the activity if they happen.
- Therefore the importance of each risk cannot be individually distinguished and kept track of.
- Also, since some risks will affect several activities, we cannot capture the entire influence of a risk using traditional 3-point estimates of impact applied to specific activities.
- The Risk Driver method allows us to specify the risks by their probability of influencing the schedule as well as the uncertainty of their impact if they do occur, and to assign the risks to all detailed tasks they influence.
3-point estimates have no clear way to represent the probability of a risks’ occurring so they miss one of the two important characteristics of the risks.
Correlation between activity durations is important in determining the possible date of completion if the organization wants a fairly conservative estimate, say at the 80th percentile (P-80).
With traditional 3-point estimates the correlation coefficients have to be estimated (guessed at) and applied between pairs of activities.
Using the Risk Drivers method correlation between activities’ durations is created during simulation based on a common risk (or common risks) affecting the activities. We no longer need to estimate the correlation coefficients with the possibility that the coefficients determine an inconsistent correlation matrix.
The basic benefit of the Risk Driver approach comes from the ability to identify, and hence prioritize the importance of risks (as distinguished from the importance of activities or paths in the traditional 3-point estimate approach). Hence Risk Drivers facilitates risk mitigation.
We do not mitigate activities or paths
We mitigate risks.
In order to determine which risks to mitigate we need to be transparent about which risks drive the results, hence the Risk Driver Method.
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