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PF3204 Revision

Explain how to perform Delphi Technique. Provide a practical case


that the specific technique can be applied. Discuss its procedure of
application and show the result
Delphi is a systematic forecasting method that involves structured
interaction among groups of experts on a subject. Two or more
rounds of experts answering questions & giving justification for
their answers, providing opportunities for changes. After a predefined criterion is reached, experts will arrive at a consensus
forecast on the subject to be discussed.
Three elements make up the Delphi Technique
Sequential questionnaires
Regular Feedback to participants
Anonymity of participants
Process: Refer to diagram below
Illustrate with examples
Problem: To evaluate the potential risk in the construction of
Cross Island Land
i.

ii.

Form a Team
a. Form a team to organize, coordinate and oversee the
Delphi. (This involves selecting the participants, and
overseeing the data collection and analysis process).
The coordinator should be independent to reduce
biasness. The team for instance can be a outsourced
party
Identify the Experts
a. Decide who should be in the panel of experts. The experts
should have ample knowledge and experience in the
required field. In this case, the panel can be the project
team, relevant stakeholders and other experts from the
industry. They could be the tunneling engineer, client,
project manager, professors from civil and engineering
department, geotechnical experts, LTA, quantity surveyor

etc. The number of people involved will depend on the


purpose and resources available.
iii. Define the problem
a. The experts need to understand exactly what they are
commenting on. The specific problem and issue
should be provided clearly and with sufficient details.
In this case, the purpose of the discussion is to
investigate on the potential problems on the
construction of cross island line. Details such as the
specific route, mode of construction, geographical
details should be provided sufficiently.
iv. Round one Questions
a. Ask General questions to gain a broad understanding
of the views of the experts about future events. The
typical question explores an issue and asks
participants to brainstorm and to briefly list their
ideas (Usually not more than 5). Code the response
forms so that you know who has responded, and who
you need to chase up for a response. Examples
questions could be
i. What are the best indicator to evaluate the
risk in the construction of CRL?
ii. What needs should be met by the
construction of CRL?
iii. What should be the objectives and targets in
the construction of CRL?
b. Analyze the responses by identifying common and
conflicted view points
v. Round 2 Questions
a. Based on the answers to the first questions, these
questions should delve deeper into the topic to clarify
specific issues. The second questionnaire should
reach a shared understanding on how the groups
views the issue. It should list all of the ideas sent in
response to the first questionnaire, and ask
participants to refine each idea, comment on the
ideas strength and weaknesses for addressing the
issue and to identify new ideas. Relative terms such

as importance desirability and feasibility should be

b.

vi.

vii.

clarified. Participants could also be asked to group,


sort or rank the responses.
For example, based on the first questionnaire, the
answers gotten for the risk could be tunneling risk,
inflation, government regulations and safety. Based
on these options, explore further and ask questions
such as what kind of inflation is expected? To what
extent will it affect the overall cost of construction
etc.

Round three questions


a. Analyze the responses to the second questionnaire
and continue with this iterative process of sending
questionnaires and analyzing responses until no
significantly new data is emerging and agreement is
reached.
b. If there is disagreement between responses at the
second stage, then a third questionnaire can be used
to explore the underlying reasons for the difference.
c. The final questionnaire aims to focus on supporting
decision making. Hone in on the areas of agreement.
d. More than three rounds of questioning can be done
to reach a closer consensus.
e. For example, based on questionnaire 2, cost is ranked
and decided upon as one of the most important
factors in the risk on the construction of CRL.
Act on the findings
a. After a final consensus has been reached. Analyze the
findings and put plans in place to deal with future
risks and opportunities to the project. The identity of
the participants should be anonymous throughout
the whole process, and thus it should not even be
revealed who participated in the Delphi process. A
report should collate all necessary details and to
ensure that the underlying reasons, assumptions or
arguments about a recommendation or decision are
included. This will allow the outcome to be better
understood in the context of which it was made.
Other factors to consider when using the Delphi Technique
The coordinator who analyses the data and writes the
questionnaires plays a very important role. He must structure
the questions properly and be careful not to let their views
and preconceptions of the issue influence how they develop
the questions and present the results.
Where there are disagreements between responses, these
should be explored, not ignored. Otherwise dissenters will
drop out and this will result in a false consensus.
Consider if this method with its inbuilt anonymity is the most
appropriate for the context. Anonymity may be disadvantage
in certain organizational settings such as in the case of
diplomatic communications where the source of statement
may be far more significant than its substance.

Advantages
1. More participants can be involved than a face to face
method allows. This will allow a variety of views and
information.
2. The time and cost of participants travelling to meetings is
saved, while still enabling their participants.
3. The anonymity of the participants is preserved, this can
avoid self-censorship and give participants the flexibility
to modify their views as they learn from others, without
the social pressure that exists in face to face meetings. The
remote process also avoids negative group influences
such as dominating members and political lobbying.
4. Provides a structured way for a group of people to make
decisions in a political or emotional environment about
complex problems
Disadvantages
5. The process is time consuming to coordinate and manage.
Delphi technique using email with 20 participants and the
processing of three questionnaires could utilize 30 40
hours of the coordinators time.
6. It can be difficult to maintain active participation by the
participants the whole way through, and so drops outs are
more likely than at one off meetings.
7. The decision making process is less transparent than face
to face meetings, and can be more easily influenced by the
coordinator. This can lead to less trust in the process and
outcome by participants.

While decision analysis should be as objective as possible, decisionmakers SUBJECTIVITY still needs to be considered in the analysis.
Explain, using an appropriate example, the IMPORTANCE OF
SUBJECTIVITY in the decision analysis process.
Introduction & explanation
Personal judgments about uncertainty and values are important
inputs for decision analysis. Discovering and developing these
judgments involves thinking hard and systematically about
important aspects of a decision.
Managers and policy makers frequently complain that analytical
procedures from management science and operations research
ignore subjective judgments. Such procedures often purport to
generate optimal actions on the basis of purely objective inputs.
But the decision-analysis approach allows the inclusion of
subjective judgments. In fact, decision analysis requires personal
judgments, they are important ingredients for making good
decisions. Furthermore, the process undertaken by the decision
maker, including generating and identifying of alternatives and
selecting and constructing of attributes is usually subjective.
Most importantly and practically, objective description requires
instrumentation and skill, and the use of the necessary resources
to achieve this may not always be justified. Ultimately, scientists
may be able to provide knowledge as accurate as required, but
such accuracy may simply be too expensive. In the case when there
is limited budget for risk analysis, performance of risk analysis can
be adversely affected and in this case, judgment takes the place of,
or perhaps more correctly, complements, objective description.
Subjectivity also plays an important role in terms of risk tolerance.
When the risk tolerance is high, even if the risk has a strong impact,
it may not be viewed seriously. Hence, the decision to mitigate
which risks and to what extent will depends on the decision
makers perception on the identified risks.
Judgment expresses professional opinion and expertise in a
particular area which itself reflects knowledge acquired by
extensive training, by experience, and by the application of
scientific methods. The reliance on judgment, notwithstanding its
subjectivity, is founded on the capability of a human being to use
his reasoning and experience to complement more scientific or
technical means of acquiring knowledge
Example: Decision on buying a passenger car
Many attributes of a car, such as horsepower, speed (km/hr) and
other capabilities are available and can be objectively described.
They are considered natural attributes as the measurements are
accepted according to some agreed and recognized scientific
methods. Attributes reflecting comfort or travel noise are much
more difficult to establish objectively, because it is our mind via the
senses that dictates how comfortable we are. Even when the
impact of noise on the individual is completely captured by decibel
units, it is the subjective (possibly nonlinear) mapping from
decibels to noise which affects preference. If this transformation is
not monotone, then it is possible that there are other attributes
which affect what we perceive as noise. Without endeavoring to
develop additional attributes, we will never fully understand the

decision makers preferences and will be unable to generate new


alternatives.
Whereas some aspects of noise can be measured objectively, for
example, by using the attributes of decibels and frequency, it
seems that comfort is a more complex criterion and therefore
much harder to define and measure. In many cases and with some
effort, the causes and reasons for the various degrees of comfort
as expressed by the decision maker can be captured by some
objective attributes, such as distances, angles or heights (of chair
to driving wheel, for example). Yet, as comfort is perceived in some
holistic manner, it is possible that, as argued in the type 2
subjectivity, it cannot be measured by any collection of objective
attributes. In this case, a subjective mapping from the alternative
direct to the criterion of comfort will be required.
Maintenance costs are a function not only of the cars present
attributes but of its future usage; consequently predictions are
needed. As more thought and study regarding scenarios in the
future are taken, better (in the sense of objective) assessments are
possible, but as probabilities reflect individual experience and
knowledge, it is frequently the judgment of the decision maker that
determines the prediction in the shape of distribution functions or
point estimates. Such assessment tends to be biased and to
overcome its pitfalls, the source and the motivation of such
assessments should be explored. On the other hand, taking risks is
part of the decision makers preference and therefore it is
subjective. While improved methods to derive the attitude toward
risk from the decision maker mind are desirable, once the
attributes of the alternatives and the probabilities are assessed, no
objective information can assist further.
The reliability of a car and its safety are even harder to measure.
Objective measures do exist (in the professional vehicle journals),
but they depend not only on the driver behavior but also on factors
that are outside of the car or the control of the driver. Eventually,
as time and money are limited, the decision maker uses his or
others judgment to determine how reliable and safe the car is. The
unavoidable trade-off between safety and other attributes of the
car is up to the will of the decision maker, taking perhaps into
account factors like pain and death which are rooted in a decision
makers values and beliefs, rather than in his experience.
Conclusion
Hence, this example on the decision whether to buy a car illustrates
the importance of subjectivity in decision analysis. This concept
applies to everyone including businesses which have to make
decisions that involve a larger scale and greater complexity. It is
often impractical for anyone including businesses to spend a huge
amount to explore all the possibilities and alternatives in a decision
analysis, subjective judgment will be required especially during the
risk identification and analysis process.

Risk management consists of five major processes. Explain, using


appropriate examples, how a decision makers value system
influences each of the processes
Risk Management Process
The risk management in a project encompasses the planning of risk
to decide the approach, identification of influencing factors which
could negatively impact the project, analyzing of risk which
includes qualitative and quantitative analysis of the associated
impact of the potential risk, implementation of measures to
mitigate the potential impact of the risk, and monitoring and
control to keep track of identified risk.

Decision maker value system


Decision Makers value system varies between individuals. It is a
reasoning process which can be rational or irrational and can be
based on explicit or tacit assumptions or on past experiences and
knowledge. It is a highly cognitive process and can consist of
personal bias and subjectivity. The decision maker must rely upon
sound judgment and appropriate tools. Decisions are usually based
on the project managers tolerance for risk, along with contractual
requirements, stakeholder preferences etc.
Risk Planning
Risk Planning is in initial phase of the risk management plan. It
consists of the process of deciding how to approach and conduct
the risk management activities for a project. It is done early during
the project planning so as to enhance the possibility of success of
the four other risk management process. It ensures that the level,
type and visibility of risk management are commensurate with
both the risk and importance of the project to the organization. It
also provides sufficient resources and time for risk management
activities, and also establishes an agreed upon basis for evaluating
risk.
For example, for the construction of Cross Island Line which consist
of tunneling and other high risk construction methods which
affects the success of the project critically, the decision maker may
wish to allocate more resources and time in the planning of risk.
Methodology and risk management activities such as experts
opinion and consultation with stakeholders could be planned for.
Risk Identification
Risk identification determines the risks affecting the project and it
documents their characteristics. It is an iterative process
throughout the risk management process. Risk can be identified via
tools such as group brainstorming with diagram tools, historical
data, and structured check list.

For example, in the construction of CRL, in order to accurately


identify the potential risk, the decision maker can conduct activities
such as Delphi Technique which is a systematic forecasting method
that involves structured interaction among groups of experts on a
subject can be done. Identified risk can then be classified
accordingly and recorded down in the risk register with additional
details such as risk factor, scope etc. One of the many risks could
be ground conditions and the risk factor could be poorly done site
investigation. Another risk could be productivity, of which the risk
factor could be fatigue of workers.
Risk Analysis
Project Risk analysis prioritizes the identified risks for further action
such as qualitative and quantitative risk analysis. Qualitative is
done first and it prioritizes the identified risks based on the
probability or likelihood and the magnitude of impact or effect with
the aid from experts, consultants and other participants.
For example, a probability & impact matrix can be done after
analyzing the risk to assess the frequency and severity of the risk.
These risk rating guide will help to guide a risk response. Risk of not
completing the construction project in the CRL may be prioritized
as high frequency and high severity which will require more
attention.
After which, quantitative risk analysis is done by applying
mathematical & other quantitative tools on the risks that have
been prioritized by the qualitative analysis. Techniques such Monte
Carlo Simulation & Decision Tree Analysis can be done to quantify
the risks. This method relies on the availability, reliability, and
understanding of issues that causes risk in order to produce
accurate probability.
For example, decision tree analysis can be used to structure the
decision whether to go ahead with construction of CRL above or
below ground based on the most important decision determinants
along with the probability from the utility value chart.
Risk Mitigation
Risk Mitigation is the process of developing options and
determining actions to enhance opportunities and reduce threats
to the project objectives. Risk response plan can be created based
on each of the risks identified. There are be specific response
strategies for each risks, and specification to implement the chosen
response strategy.
For example, the risk of inflation which causes the risk of high
construction price can be mitigated by placing orders earlier or
finding other sources.
Risk Monitoring and Control Input
Risk monitoring is done to keep track of the identified risks and
those on the watch list. It monitors trigger conditions for execution
of risk mitigation plans and contingency plans. It also re-analyze
existing risks and develop plans for residual risks and newly arising
risks
For example, in the case of inflation, if the cost of materials from
the local supplier exceeds the limit, it will trigger the mitigation
plans and the construction.

Conclusion
In conclusion, the decision maker value system influences each of
the risk management processes in many ways. The decision maker
must have logical reasoning and apply their knowledge and
experience practically to make informed decision for the project.
Both risk management and decision analysis are two interrelated
concepts whereby risk management affects how decisions are
made (mainly through the risk identification process) and how
decision analysis affects risk management (mainly through
subjectivity of the decision makers). Therefore, whenever decision
analysis is performed, risk management process should be
considered and whenever risks are to be identified, decision
analysis should be taken into account especially the subjectivity of
the decision makers.
As the saying goes Garbage in, garbage out, a poor risk
management will result in an inaccurate decision analysis, and
hence resulting in a higher chance of making bad decisions.
Similarly, a poor decision analysis such as modelling the decision
environment based on irrational and biased perceptions will
result in a wrong set of risks being identified and hence a wrong
type of risks to be mitigated.
How risk management affects decision analysis?
Decision analysis is mainly affected by risk management through
the risk identification process.
When several risks are identified based on enterprise
environmental factors and organisational process assets through
methods such as Delphi technique and brain storming with key
members, it involves certain level of qualitative and quantitative
analysis whereby both historical data and personal assessment
are involved in identifying the relevant risks. This will hence
affects how we analyse the risks identified and subsequently
affects the decision analysis as illustrated in the example as
follows.
Taking for example the decision to choose which MRT route to
construct. Several risks would need to be identified such as site
conditions, risk of tunnelling, ROI etc. These risks are identified
based on historical data such as the previously identified set of
risks based on past MRT projects risk registers etc. Various tools
and techniques such as Delphi technique and brainstorming with
the key members are then used to establish the risk register for
the current MRT project. Subsequently, decisions will be made
based on this set of identified risks. In the case if the risk
identification is not done properly whereby certain potential risks
are not being identified, this will result in an inaccurate decision
analysis.
How decision analysis affects risk management?
To mitigate the risks, a good decision analysis is needed to make a
good choice in mitigating the correct risk. Given a set of identified
risks, the decision maker needs to decide on which risks to
mitigate and this process often involves their personal
assessment, certain assumptions as well as subjective perceptions
on certain risks.

For example, in deciding which risks to mitigate in the


construction project of MRT routes, certain weightages will need
to be assigned to the various risks. These weightages will depend
on the decision makers knowledge, their perception of that
particular risk according to the conditions given. For example,
given that the MRT construction project must be completed
within the next 1 or 2 years but experience several environmental
problems such as causing severe ecological impact, the decision
maker who might be an environmental activist will view
environmental impact as a very important factor, on the other
hand, the decision maker who is value time more important than
anything else will put time as one of the top priorities and hence
rank project delay as the top risk to mitigate. This will hence
affects the selected risks to be placed in the sensitivity analysis
and subsequently in the decision tree, which will then affect the
decision on which risk to mitigate.

Discuss the relationship between Risk Management and Decision


Analysis using appropriate examples.
Risk Management Process
The risk management in a project encompasses the planning of risk
to decide the approach, identification of influencing factors which
could negatively impact the project, analyzing of risk which
includes qualitative and quantitative analysis of the associated
impact of the potential risk, implementation of measures to
mitigate the potential impact of the risk, and monitoring and
control to keep track of identified risk.

Decision Analysis
Decision analysis is a formal method for understanding and
modeling a decision environment containing various uncertain risk.
It is a method for making more aware decisions and approach for
minimizing expected losses and maximizing expected gains.
Decisions based on the decision analysis are usually affected by the
decision maker value system. This is elaborated below.
How Risk management affects Decision Analysis
Both risk management and decision analysis are highly related to
one another. Risk management identifies the key determinants and
factors which will affect the performance of the project. For
instance, in the construction of the CRL across Singapore, key
determinants such as time, cost and connectivity are identified.
Furthermore, sub factors such as material cost are further
developed from the key determinants for higher accuracy.
Based on these key determinants and factors, an influence diagram
is developed to help the decision maker understand how each
factor will affect one another. This is important as the factors are
interlinked, impact of one factor will affect other. For example, the
time taken to construction the CRL will affect the cost of
construction.
After which, analytical Hierarchy Process is done to weigh the key
determinants according to their importance on the overall
performance of the project. This will allow the decision maker to
know which factors affects the project significantly and to place
more attention on these factors.
Following which, risk analysis which consists of qualitative and
quantitative analysis is executed to evaluate the impact and extend
of each variable on the overall performance of the project. This is
done through sensitivity analysis and will give us the spider diagram
and tornado diagram. For example, in the construction of CRL,
sensitivity analysis may tell us that factors such as accessibility and
population using the stations are deemed to be the two most
important variables with the largest range of effect on the total

performance, and will cause the greatest percentage change in


total project cost.
A decision tree is then developed based on the most important
factors and their probability. The branch with the highest
calculated expected monetary value is chosen as it brings about the
highest benefit to the project.
Based on the process of the risk management as mentioned above,
the decision maker will then use the information to decide which
factors to look out for and how they can be mitigated or eliminated.
The risk management process will give the decision maker a
prioritized list of risk, probabilistic analysis of the project so as to
make informed decision to achieve project objectives.
How decision analysis affects risk management
Decision analysis is affects risk management mainly due to the
decision maker value system. A decision makers value system is
how he or she sees evaluates the factors based on her experience
and reasoning. Decision Makers value system varies between
individuals. It is a reasoning process which can be rational or
irrational and can be based on explicit or tacit assumptions or on
past experiences and knowledge. It is a highly cognitive process and
can consist of personal bias and subjectivity. The decision maker
must rely upon sound judgment and appropriate tools in decision
making. Also, decisions are usually based on the project managers
tolerance for risk, along with contractual requirements,
stakeholder preferences etc.
For example in the case of CRL, even though the risk management
output indicates that accessibility is the most important factor
which affects the overall performance of the project, the decision
maker may have a different perspective on this. The level of
uncertainty from the factors affecting the situation is complex.
Based on subjectivity and experience of the decision maker, he may
feel that cost is a more important factor due to the significant
steady increase in the inflation rate over the past quarter. The
decision maker will then plan for more resources to mitigate
increase in cost rather than improving on accessibility.
Conclusion
In conclusion, both risk management and decision analysis are
highly related to each other. It is very important to ensure that risk
management is done as accurately as possible while on the other
hand, also to ensure that decision analysis are logical and are based
on sound judgment.
All have approached the problem utilizing theoretical frameworks
based on mathematical principles, yet it is crucial decision-making,
and the human response to uncertainty is examined from a
psychological standpoint.

Risk Register
A risk register acts as a central repository for all risks identified by
the risk management team. It includes
Description of the risk : A brief Description of the potential
risk
Risk Category: For example, type and scope of risk. Using
these categories enable grouping for future references.
Probability of its occurrence: Estimated likelihood or
probability that the risk will occur and become an issue.
Impact of the Risk: Description of potential impact
Root causes: What causes the risk, useful for mitigation plans
A summary of planned response should the event occur
(Mitigation and Contingency): Action plan to address the risk
Risk Code: Unique identification number used to identify and
track the risk.
Risk identified in risk identification process and updated during the
risk analysis process.
Disadvantages
Risk registers often lead to ritualistic decision making and illusion
of control. For example, Toyotas risk register listed reputation risks
caused by Prius malfunctions but the company failed to take
action. It is important to note that while identification of risk is
crucial, it is the action taken to mitigate the risk that is important.
Advantages
The risk register allows for easy review and updates on the
potential risk so as to manage risks down to acceptable levels. The
register provides a framework in which problems that threaten the
delivery of the anticipated benefits are captured.
Risk Code
01
02

Type
Internal
External

Scope
Local
External

Probability
2
3

Impact
2
2

Risk Center
Labor
Economic

Risk
Productivity
Material cost increase

Risk Factor
Fatigue
Inflation

Mitigation
Break
Order Earlier

Contingency
Take day off
Change material

Exam guidelines based on AY14/15 Semester 2 Paper

Cost

1) Establish, by identifying at least THREE KEY DECISION


DETERMINANTS and at least TWO FACTORS per KEY DECISION
DETERMINANT, a CONCEPTUAL OBJECTIVE FUNCTION that can
be used to make the right decision under the situation described
on the previous page. (10 marks)
Three key determinants with 2 factors per key
determinants (around 8 marks)
Conceptual objective function (around 2 marks)
Explanation for why each variable (usually only needed
for questions that ask for objective function only)
Consider key determinants such as Time, Cost, Quality,
Performance, performance, connectivity etc. Examples

2) Establish, by performing AHP analyses to assign reasonable


WEIGHTAGES to the KEY DECISION DETERMINANTS and factors
in Question 1, a FINAL OBJECTIVE FUNCTION. (10 marks)
AHP for key determinants and factors (Pair-wise
comparison table)
Final Objective Function
Explain values briefly
The Analytic Hierarchy Process (AHP) is a structured technique for
organizing and analysing complex decision. It calculates the
weightage of each variable in the objective function

Footing performance
Load Bearing
Load Bearing
1
Durability
0.57
Sum
1.57
Weightage
0.64

Time
1.75
1.25
1
4.00
0.25

Durability
1.75
1
2.75
0.36

Time
Redesigning
Construction
Sum
Weightage

Redesigning
1
0.8
1.8
0.55

Professional fees
1.5
1
2.5
0.40

Try to assign higher weightages to factors you wish to use for


tornado later in the question.
Objective Function: Value to COTOCO WHOLESALE
= 0.45 x ((0.64 x Loadbearing capacity) + (0.36 x Durability))

+ 0.25 x ((0.55 x Duration of Redesigning)) + (0.45 x Duration of


Construction))

Try to have key determinants and factors that have a consistent


positive/negative relationship.

Cost
1.5
1
0.8
3.30
0.30

Material Cost
1
0.67
1.67
0.60

+ 0.30 x ((0.60 x Material Cost)) + (0.40 x Professional Fees))

Objective Function: Value to COTOCO WHOLESALE


= Minimize Time
+ Minimize Cost
+ Maximize Footing Performance

Pair-Wise Comparison Table


Values to Use
Footing Performance
Footing Performance
1
Cost
0.67
Time
0.57
Sum
2.24
Weightage
0.45

Material Cost
Professional Fees
Sum
Weightage

Duration of Construction
1.25
1
2.25
0.45

3) Identify, by performing the SENSITIVITY ANALYSES on the


factors in Question 1 and drawing TORNADO and SPIDER
DIAGRAMS, the factor(s) which has (have) the strongest impact
on the decision. (20 marks)

Output formula
Converted Information
For sensitivity % change table, just insert change (%) for
both input and output variable.
Note: when calculating output change (%), use the
correct weightage!
Tornado Diagram (dont need to draw accurately)
Note: Calculate the range of % change & rank them
before drawing!
Spider Diagram (dont need to draw accurately)

Output Formula
Objective Function: Value to COTOCO WHOLESALE
= 0.45 x ((0.64 x (Loadbearing capacity 100%)) + (0.36 x
(Durability 100%)))
+ 0.30 x ((0.60 x (100% - Material Cost)) + (0.40 x (100% Professional Fees)))
+ 0.25 x ((0.55 x (100% - Duration of Redesigning)) + (0.45 x (100%
- Duration of Construction)))
Converted Info
Summary for Output value to COTOCO WHOLESALE
Base
Key Determinant
Factors
Value
Loading Bearing
100
Footing
Capability
Performance
Durability
100
Material Cost
100
Cost
Professional Fee
100
Duration of
100
Redesigning
Time
Duration of
100
Construction

Min

Max

65

130

88
75
83

145
130
115

89

110

91

115

Sensitivity Analysis
Key
Deter
minant

Footin
g
Perfor
mance

Input
Name
Load
beari
ng
capab
ility

As shown in the graph, the variable

slope having the greatest unit change in the expected value,


Input Variation

Output Variation

affecting the range of the output % change by a total of about


and it is most likely due to its large input range of about

65
100

-35
0

-35%
0%

70
100

-30
0

-30%
0%

130

30

30%

120

20

20%

expected value as it has the longest vertical length of line.

88
-12 -12% 90 -10 -10%
100
0
0%
100
0
0%
145 45
45% 130 30
30%
-25 -25% 80 -20 -20%
Mater 75
Cost
ial
100
0
0%
100
0
0%
Cost
130 30
30% 110 10
10%
* Explain Briefly. Sate, do the same for the rest of the factors*

4) Provide, by drawing a DECISION TREE with EXPECTED


MONETARY VALUES based on UTILITIES, your recommendation
for your client, COTCO WHOLESALE. (20 marks)

Tornado Diagram
Draw all six with top 2 having obvious difference
(In this case, it will be load bearing capability and durability)

Utility Value Analysis Table (just show a few)


Decision Tree
Note: derive your own probabilities, rmb probabilities
must all add up to 1 from chance branches.

After conducting the sensitivity analysis, the top 3 variables from


the tornado diagram are chosen as inputs for the decision tree,
which are
,
and
. These 3
variables are plotted in the decision tree, with the first variable
affecting the 2nd variable and then the 3rd variable.
Utility Value Analysis

Y axis: Factors
X axis: Percentage Change in Total Project Cost/Base Value
From the tornado graph, those variables with a longer bar has a
largest range of impact on the outcome and hence has the most
impact to the output. The results show that the top 2 or 3 factors
with the most impact on the project objective are

Spider Diagram
Draw all six

%.

The total variation in ______ has the largest total effect on

Durab
ility

followed by

has the steepest

and

.
Explain how you get the utilities value
Weightage will be based on previous values
Main Weightage Footing Performance: 0.45
Factor Load Bearing Capacity: 0.64
Factor: Durability: 0.36
Decision Tree

The option ___ should be taken as it has the highest EMV of ____
as compared to the EMV of the other options.
However subjectivity should be considered in the analysis of
choosing the appropriate options as it depends on many factors
such as the firms risk tolerance, market outlook, perceived
capability to handle risk, etc. It is also important to note that any
option with a negative EMV should not be considered since it brings
about losses, unless the decision maker has a very valid reason.
Preliminary Influence Diagram
The influence diagram shows the interdependency and relationship
between the drivers and sub drivers. The sheer connectivity
underscores the need of an influence diagram to ensure that the
decision maker goes through a thorough thought process before
arriving at an informed decision.
Sensitivity Analysis
One way sensitivity analysis enabled us to determine how a unit
change in an independent variable will affect the output dependent
variable under a prescribed set of assumptions and values. It
identifies sensitive variables and eliminates insensitive variables
with regards to the output.
Tornado Graph
Modified the bar chart that reveal the range of impact an input has
on an outcome, presenting both ranking and the size of magnitude
of the impact. Variables with largest impact is placed at the top
followed by others in descending impact order.
Spider Diagram
Illustrates the complication of all the sensitivity graphs. The slope
tell us the relative change in the outcome per unit change in each
sub variable. We can get information on which variable that has the
largest total variation and which has the largest total effect based
on the length and gradient of the slope.
Decision Tree
Decision trees allows project managers to distinguish between
decisions where we have control and change events that may or
may not happen. It takes into account the costs and rewards of
decision options as well as the probabilities and impacts of
associated risks.
EMV
Expected Monetary Value is a ballpark figure that shows how much
money a plaintiff can reasonably expect in mediation. It accounts
not only for dollar figure assigned to each outcome buy also for the
likelihood of that outcome occurring.