Chapter 3

Adequacy of Methods to Assess

Project Uncertainties

Y. Raydugin. Project Risk Management: Essential Methods for Project Teams and Decision Makers. John Wiley & Sons Inc., New York, 2013
Origins of Some Risk Assessment Methods
• Estimating
• Scheduling
• Reliability engineering
• Health and Safety
• Economics
• Military
• Security
• Development and marketing of risk software tools

None of the methods referred to above is directly applicable to risk management

of capital projects without taking into account all the relevant uncertainty
objects and features of a project RMS.
But attempts to impose those methods are all too common.

Y. Raydugin. Project Risk Management: Essential Methods for Project

Teams and Decision Makers. John Wiley & Sons Inc., New York, 2013 2
 Adequacy and “Distance to Reality”
• Each assessment or modeling method could be described by
its distance to reality.
• Talking-point methods bring zero or negative value as they do
not adequately reflect reality (are too distant from risk reality).
• Mathematically overly complicated methods do not allow
engaging project teams and decision makers properly (are too
close to risk reality).
• Some (near-risk, pseudo-risk or ersatz) methods do not handle
uncertainty objects properly and just reflect on proponent’s
background and biases (have nothing to do with risk reality).

Y. Raydugin. Project Risk Management: Essential Methods for Project

Teams and Decision Makers. John Wiley & Sons Inc., New York, 2013 3
 Assessment Methods

Only deterministic-qualitative and probabilistic-quantitative

methods are adequate for assessment of the objects.
The others absorb and amplify the shortcomings of these methods.
[One exception: cost escalation and exchange rate assessments]
Y. Raydugin. Project Risk Management: Essential Methods for Project
Teams and Decision Makers. John Wiley & Sons Inc., New York, 2013 4