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Chapter 14 Schedule Risk Management

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Chapter 14 Schedule Risk Management Powered By Docstoc
					       Chapter 14
Schedule Risk Management
       Dr. Ayham Jaaron
   Second Semester 2010/2011
              Introduction
• Schedule risks are both threats and
  opportunities to the success of a project.

• Threats tend to reduce the success of
  meeting the project goals and
  opportunities tend to increase the success.
   Risk Management Definition
• Risk management:
“it is the process of identifying, analyzing,
   qualifying and quantifying the risks, and
   developing a plan to deal with them.”
• This is routinely done during baseline
   schedule development as well as during
   schedule updates.
   Contingency cost to cover Risk
            expenses
• Most estimators will automatically add a
  contingency to a cost estimate to cover the
  risk of performance based on the type of
  project and circumstances pertaining to
  the undertaking of the project.
• Estimators estimate this contingency using
  their own rules of thumb developed over
  years of estimating.
 Uncertainty in duration estimation
• Risk management recognizes the uncertainty in
  duration estimating and provides a system to
  brainstorm other risks that may occur during the
  project.
• Probability distributions are the best way to model
  planned activity durations, as noted by Hulett:

‘‘The best way to understand the activity durations
  that are included in the schedule is as probabilistic
  statements of possible durations rather than a
  deterministic statement about how long the future
  activity will take.
      Causes of risks in construction
                 projects
Risks can be a function of:
1. the type of soils encountered,
2. the local municipality, and its culture and history of keeping
    good records of obsolete utilities.
3. If the city in which the project is to be built has a history of
    requiring contractors to remove all abandoned underground
    lines, there is a much lower risk of underground conflicts.
4. The selection of the project team
5. Capability of contractors.
6. Weak subcontractor on a project
7. local weather conditions, which, when adverse, can significantly
    impede progress.
8. Local political situations, especially in volatile political climates,
    may hamper all efforts to construct a project efficiently.
9. Safety violations and accidents can shut down a job completely
10. A large volume of change orders.
        Schedule Risk Types
Schedule risks fall into several broad areas:

1. General duration uncertainty
2. Specific risk events
3. Network logic risks that exist or are
  increased as a result of the activity
  relationships
     General duration uncertainty
• General duration uncertainty is the risk resulting from these
  conditions:

1.   The deterministic durations estimated by the stakeholders
     are inaccurate or overly simplistic or are based on
     assumptions not necessarily correct or accurate
2.   The critical path identified in the deterministic approach may
     not be the same as the probabilistic critical path when risks
     are incorporated into the schedule
3.   The combinations of durations, where pessimistic durations
     may stack along a path—because of logic relationships—will
     significantly extend the predicted completion date
            Specific risk events
• Specific risk events are potential impacts on the
  schedule that may or may not occur such as accidents
  and other events that are hard to predict.

• Specific event risks include several types of risks that
  are analyzed by several methods, but the initial step
  is a brainstorming session in which project team
  members identify as many potential risk events as
  possible and create a risk register or checklist of those
  events. The process of identifying potential risks to a
  project is a valuable effort that helps the project
  management team to start thinking about risk issues
  and produces a more realistic schedule.
            Network logic risks
• Network logic risks are those that generally occur as a
  result of project management decisions made about
  the sequencing of activities determined by the activity
  relationships.
• If a number of paths originate or terminate in one
  activity, there is a significantly increased risk of delay
  to path activities causing delay to the project.
• Network logic risks include any risks that
  predominately relate to the schedule network such as
  activities that occur at a ‘‘hub’’ or convergence point. A
  single activity that controls multiple activities of
  subsequent work will cause serious delays and
  disruption should it not be completed on time.
   IMPORTANCE OF GOOD PLANNING
       FOR RISK MANAGEMENT
• developing a good and encompassing master risk register is a
  brainstorming workshop with experienced attendees, and
  following that process with analysis and risk allocation.
• This is combined with a process of continuing risk monitoring
  during updates as well as continuous cycles of risk
  management.

• With a thorough and organized risk workshop, based on a
  good master risk register, and participation by the major
  stakeholders as well as the project management team, the
  output of the risk analysis will be very useful. The most likely
  risks will be identified and analyzed, and with the rest of the
  risk management steps, the schedule will evolve into a risk-
  adjusted schedule, capable of reasonable analysis and
  realistic completion predictions.
     Risk Shifting in Contracts
• One example of this risk shifting is the use of
  clauses stating that geotechnical reports and
  information are provided to bidders for
  information only, and the owner is not
  responsible for any usage or wrong
  interpretation of the geotechnical information.
• This is an attempt to limit the owner’s
  exposure to delays because of differing site
  conditions.
      Schedule Risks Management
               process
1.   identifying risks, defined as ‘‘the process of determining
     which risks may affect the project and documenting their
     characteristics’’;
2.   performing qualitative risk analysis, defined as ‘‘the process
     of prioritizing risks for further analysis or action by assessing
     and combining their probability of occurrence and impact’’;
3.    performing quantitative risk analysis, defined as ‘‘the
     process of numerically analyzing the effect of identified risks
     on overall project objectives’’;
4.    planning risk responses, defined as ‘‘the process of
     developing options and actions to enhance opportunities and
     to reduce threats to project objectives’’; and
5.    monitoring and controlling risk, defined as ‘‘the process of
     implementing risk response plans, tracking identified risks,
     monitoring residual risks, identifying
schedule risk management process
1. Risk management planning:
This should include determining how the risk
    management will be carried out as well as developing
    a master risk register that would serve to facilitate
    risk identification.
2. Identifying schedule risks:
Facilitating a risk workshop is a good way to start the
   next step of this process. With a good master risk
   register in hand, and an experienced and
   knowledgeable facilitator, a short meeting with the
   specific project management team and other important
   stakeholders can be efficient and revealing.
            Risk management
           process...continued.
3. Performing qualitative analysis:
Once specific risk events are identified and
  recorded in the risk register, the next step in
  risk management is to analyze the risks
  qualitatively. This process involves making
  judgments about the likelihood of occurrence
  for each risk as well as prioritizing the risks,
  based on a combination of likelihood and
  severity of consequences.
             Risk management
            process...continued
4. Performing quantitative analysis:
The next step after completing the qualitative
   assessment is the quantitative analysis of the
   risks. Qualitative descriptions, used to identify the
   likelihood and consequences of risk, are then
   aligned with quantitative probabilities in a process
   often called probability mapping. The qualitative
   descriptions are used to make it easier to evaluate
   risks, and once those are completed, this
   probability mapping converts those descriptions
   into values that can be used in the software risk
   calculations.
           Risk management
          process...continued
5. Responding to and resolving risks:
Risks are listed and analyzed, the next step
  is resolving risks by various means. These
  means include avoiding, shifting, or
  preventing all possible risks, and
  accepting remaining unresolved risks and
  incorporating those risks into the schedule,
  as well as documenting the decisions.
            Risk management
           process...continued
6. Monitoring and updating the risk
  management plan:
This step also includes evaluating existing
  unresolved risks with each update, as well as
  starting the identification cycle for new risks
  again. This new cycle comprises the same
  steps that were performed for the baseline
  schedule. New risks should be identified,
  qualitatively and then quantitatively analyzed,
  prioritized, and responded to or resolved.

				
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