helberdcmacedo

Risk Management – Quantitative Risk Analysis - Part IV Carlos E. Braga

1 Definition - Quantitative Risk Analysis 3 Example: Risk allocation in the master schedule PAGE 01

Quantitative Risk Analysis intends to provide Discrete risk are risk that have high impacts and low probability. If you consider this risk in as
the overall risk result in the project objectives. continuous, you are overestimating the impact in the activity.
Using quantitative estimates for risk impact Description Duration
and probability applied to the schedule, cost Activity – 120 days
Activity – Crane operation 120 days
estimates, or integrated cost and schedule. It
related activities Risk Event
also helps for a better understanding of 60 days
individual risk exposure for a more critical Risk Event – Crane break
prioritization. Risk Event Impact 60 days to replace
95% 5%
Risk Event Probability 5%
2 Process Map* (Simplified)
Continuous risk are smaller risks with several causes. Mostly uncertainties that have high
Risk allocation in the probability. To represent to risks, you use a continuous distribution. Examples: Beta, Triangular
Qualitative risk master schedule, or Normal as best represent the risk or risks. In this example we use a triangular distribution
analysis (Input) cost estimate or to represent the risk impact.
integrated C&S.
Description Duration
Activity – Crane operation 120 days Activity – 120 days
related activities 120
Several small risks Duration
100 140
Results and Run Monte Carlo sampling
Activity Opimistic Duration 100 days
Analysis Simulation frequency Duration
Activity Most Likely Duration 120 days
sampling range
Activity Pessimistic Duration 140 days
* See page3.
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Risk Management – Quantitative Risk Analysis - Part IV Carlos E. Braga
PAGE 02
4 Cumulative Distribution for Project Finish Date

Entire Plan : Finish Date

100% 21/11/22 Monte Carlo Simulation
180

P90
95% 14/08/22 Provides a probabilistic range of
170
90% 19/07/22
possible deadlines as a result of
160

overall risks, discrete and

85% 01/07/22

150 80% 17/06/22

140 75% 04/06/22

continuous represented in the
130 70% 23/05/22 model.
120
65% 12/05/22 It is done using the software as
110
60% 02/05/22
Primavera risk analysis, or @risk.

Cumulative Frequency
100
P50
55% 21/04/22
It should be done using thousands
Hits

50% 10/04/22
90
of simulations (interactions)
202 days 45% 27/03/22
80
40% 13/03/22 through a master schedule.
70 of range
60
35% 28/02/22 The schedule must be updated
50
30% 15/02/22
and logically linked (the schedule
40
25% 02/02/22
should not contain open activities
20% 21/01/22

30 and lags should be avoided).

P10 15% 09/01/22

20
10% 28/12/21 In this case, the graphic shows
10 5% 11/12/21 more than one peak due to the
0
03/01/22 13/04/22 22/07/22 30/10/22
0% 07/10/21
use of discrete distributions in the
Distribution (start of interval)
model.
 helberdcmacedo
Risk Management – Quantitative Risk Analysis - Part IV Carlos E. Braga

5 Cumulative Distribution for Project Cost PAGE 03

Entire Plan : Cost

900
100% R$398,357,623
Monte Carlo Simulation
95% R$342,921,471

850 P90 90% R$333,318,179

800 85% R$328,117,160

The same logic is applied to cost
750
43,2 R$ MM 80% R$323,247,444

700 75% R$318,866,352

In future posts, will be explained
of range
650 70% R$314,841,055
concepts as:
✓ Pre and pos mitigate scenarios,
65% R$311,651,483
600

60% R$308,685,907

✓ Risk analysis integrated (time

550

Cumulative Frequency
55% R$305,783,070
500
P50 and cost)
Hits

50% R$302,952,673
450

400
45% R$299,847,155
✓ Contingency Definition.
40% R$296,854,812
350
35% R$293,745,200

300
P29 30% R$290,740,937
Consequently, the process flow
250
25% R$287,650,279
proposed in figure 2 will be more
200
20% R$284,192,858 detailed in the next posts.
150
15% R$280,550,349

100
10% R$276,740,919

50 5% R$271,472,048

0 0% R$247,468,803
R$250,000,000 R$300,000,000 R$350,000,000 R$400,000,000
Distribution (start of interval)