Risk Identification: Inputs Risk Identification: Tools and Techniques
11.4 Quantitative Risk Analysis
Quantitative Risk Analysis is performed on risks that have been prioritized by the Qualitative Risk Analysis process as potentially and substantially impacting the project’s competing demands. The Quantitative Risk Analysis process analyzes the effect of those risk events and assigns a numerical rating to those risks. It also presents a quantitative approach to making decisions in the presence of uncertainty. This process uses techniques such as Monte Carlo simulation and decision tree analysis to: • Quantify the possible outcomes for the project and their probabilities • Assess the probability of achieving specific project objectives • Identify risks requiring the most attention by quantifying their relative contribution to overall project risk • Identify realistic and achievable cost, schedule, or scope targets, given the project risks • Determine the best project management decision when some conditions or outcomes are uncertain. Quantitative Risk Analysis generally follows the Qualitative Risk Analysis process, although experienced risk managers sometimes perform it directly after Risk Identification. In some cases, Quantitative Risk Analysis may not be required to develop effective risk responses. Availability of time and budget, and the need for qualitative or quantitative statements about risk and impacts, will determine which methods to use on any particular project. Quantitative Risk Analysis should be repeated after Risk Response Planning, as well as part of Risk Monitoring and Control, to determine if the overall project risk has been satisfactorily decreased. Trends can indicate the need for more or less risk management action. It is an input to the Risk Response Planning process. Figure 11-9. Quantitative Risk Analysis: Inputs, Tools Techniques, and Outputs A Guide to the Project Management Body of Knowledge PMBOK ® Guide Third Edition 254 2004 Project Management Institute, Four Campus Boulevard, Newtown Square, PA 19073-3299 USA11.4.1 Quantitative Risk Analysis: Inputs
.1 Organizational Process Assets Information on prior, similar completed projects, studies of similar projects by risk specialists, and risk databases that may be available from industry or proprietary sources. .2 Project Scope Statement Described in Section 5.2.3.1. .3 Risk Management Plan Key elements of the risk management plan for Quantitative Risk Analysis include roles and responsibilities for conducting risk management, budgets, and schedule activities for risk management, risk categories, the RBS, and revised stakeholders’ risk tolerances. .4 Risk Register Key items from the risk register for Quantitative Risk Analysis include the list of identified risks, the relative ranking or priority list of project risks, and the risks grouped by categories. .5 Project Management Plan The project management plan includes: 11 • Project schedule management plan. The project schedule management plan sets the format and establishes criteria for developing and controlling the project schedule described in the Chapter 6 introductory material. • Project cost management plan. The project cost management plan sets the format and establishes criteria for planning, structuring, estimating, budgeting, and controlling project costs described in the Chapter 7 introductory material.11.4.2 Quantitative Risk Analysis: Tools and Techniques
.1 Data Gathering and Representation Techniques • Interviewing. Interviewing techniques are used to quantify the probability and impact of risks on project objectives. The information needed depends upon the type of probability distributions that will be used. For instance, information would be gathered on the optimistic low, pessimistic high, and most likely scenarios for some commonly used distributions, and the mean and standard deviation for others. Examples of three-point estimates for a cost estimate are shown in Figure 11-10. Documenting the rationale of the risk ranges is an important component of the risk interview, because it can provide information on reliability and credibility of the analysis. A Guide to the Project Management Body of Knowledge PMBOK ® Guide Third Edition 2004 Project Management Institute, Four Campus Boulevard, Newtown Square, PA 19073-3299 USA 255 A Guide to the Project Management Body of Knowledge PMBOK ® Guide Third Edition 256 2004 Project Management Institute, Four Campus Boulevard, Newtown Square, PA 19073-3299 USA Figure 11-10. Range of Project Cost Estimates Collected During the Risk Interview • Probability distributions. Continuous probability distributions represent the uncertainty in values, such as durations of schedule activities and costs of project components. Discrete distributions can be used to represent uncertain events, such as the outcome of a test or a possible scenario in a decision tree. Two examples of widely used continuous distributions are shown in Figure 11-11. These asymmetrical distributions depict shapes that are compatible with the data typically developed during the project risk analysis. Uniform distributions can be used if there is no obvious value that is more likely than any other between specified high and low bounds, such as in the early concept stage of design. Figure 11-11. Examples of Commonly Used Probability DistributionsParts
» Project Characteristics What is a Project?
» Projects vs. Operational Work
» Projects and Strategic Planning
» Introduction, defines key terms and provides an overview for the
» Project Life Cycle and Organization, describes the environment in
» Project Management Processes for a Project, describes the five
» Project Integration Management, describes the processes and
» Project Scope Management, describes the processes involved in
» Project Procurement Management, describes the processes that
» Project Management Body of Knowledge
» Application Area Knowledge, Standards and Regulations
» Understanding the Project Environment
» General Management Knowledge and Skills
» Interpersonal Skills Areas of Expertise
» Project Management Office Project Management
» What is Project Management? The Project Life Cycle 2.2 Project Stakeholders
» Organizational Influences Index of /misc
» Characteristics of the Project Life Cycle
» Characteristics of Project Phases
» Project Life Cycle and Product Life Cycle Relationships
» Project Stakeholders Index of /misc
» Organizational Structure Organizational Influences
» The Role of the PMO in Organizational Structures
» Project Management System Organizational Influences
» Project Management Processes Index of /misc
» Initiating Process Group Project management Process Groups
» Planning Process Group Project management Process Groups
» Executing Process Project management Process Groups
» Monitoring and Controlling Process Group
» Process Interactions Index of /misc
» Project Management Process Mapping
» Develop Project Charter – developing the project charter that formally
» Develop Preliminary Project Scope Statement – developing the preliminary
» Develop Project Management Plan – documenting the actions necessary to
» Direct and Manage Project Execution – executing the work defined in the
» Monitor and Control Project Work – monitoring and controlling the
» Integrated Change Control – reviewing all change requests, approving
» Close Project – finalizing all activities across all of the Project Management
» Develop Project Charter: Inputs
» Develop Project Develop Project
» Develop Preliminary Project Scope Statement: Inputs
» Develop Preliminary Project Scope Statement: Tools and Techniques
» Develop Preliminary Project Scope Statement: Outputs
» Develop Project Develop Project Management Plan
» Develop Project Management Plan: Outputs
» Direct and Manage Project Execution: Inputs
» Monitor and Control Project Work: Inputs Monitor and Control Project Work: Tools and Techniques
» Monitor and Control Project Work: Outputs
» Close Project: Inputs Close Project
» Close Project: Close Project
» Close Project: Outputs Close Project
» Scope Control – controlling changes to the project scope.
» Scope Planning: Scope Planning
» Scope Planning: Tools and Techniques Scope Planning:
» Scope Definition: Inputs Scope Definition
» Scope Definition: Tools and Techniques Scope Definition: Outputs
» Create WBS: Tools and Techniques
» Create WBS: Outputs Create WBS
» Scope Control: Inputs Scope Control
» Scope Control: Tools and Techniques
» Scope Control: Outputs Scope Control
» Activity Definition – identifying the specific schedule activities that need to
» Activity Sequencing – identifying and documenting dependencies among schedule activities.
» Activity Duration Estimating – estimating the number of work periods that
» Schedule Development – analyzing activity sequences, durations, resource
» Schedule Control Index of /misc
» Activity Definition: Inputs Activity Definition
» Activity Definition: Tools and Techniques
» Activity Definition: Outputs Activity Definition
» Activity Sequencing: Inputs Activity Sequencing
» Activity Sequencing: Tools and Techniques
» Activity Resource Estimating: Inputs
» Activity Resource Estimating: Tools and Techniques
» Activity Resource Estimating: Outputs
» Activity Duration Estimating: Inputs
» Activity Duration Activity Duration
» Activity Duration Estimating: Outputs
» Schedule Development: Inputs Schedule Development
» Schedule Development: Tools and Techniques
» Schedule Development: Outputs Schedule Development
» Schedule Control: Outputs Schedule Control
» Cost Estimating – developing an approximation of the costs of the resources
» Cost Budgeting – aggregating the estimated costs of individual activities or
» Cost Control – influencing the factors that create cost variances and
» Cost Estimating: Cost Estimating
» Cost Estimating: Tools and Techniques
» Cost Estimating: Outputs Cost Estimating
» Cost Budgeting: Inputs Cost Budgeting
» Cost Budgeting: Cost Budgeting
» Cost Budgeting: Outputs Cost Budgeting
» Cost Control: Inputs Cost Control: Tools and Techniques
» Cost Control: Outputs Cost Control
» Quality Planning – identifying which quality standards are relevant to the
» Perform Quality Assurance – applying the planned, systematic quality
» Perform Quality Control – monitoring specific project results to determine
» Quality Planning: Inputs Quality Planning
» Quality Planning: Tools and Techniques
» Quality Planning: Quality Planning
» Perform Quality Assurance: Inputs Perform Quality
» Perform Quality Assurance: Outputs
» Perform Quality Control: Inputs
» Perform Quality Control: Tools and Techniques
» Perform Quality Control: Outputs
» Human Resource Planning – Identifying and documenting project roles,
» Acquire Project Team – Obtaining the human resources needed to complete
» Develop Project Team – Improving the competencies and interaction of team
» Manage Project Team – Tracking team member performance, providing
» Human Resource Planning: Inputs
» Human Resource Planning: Tools and Techniques
» Human Resource Planning: Outputs
» Acquire Project Team: Inputs
» Acquire Project Team: Tools and Techniques
» Acquire Project Team: Outputs
» Develop Project Team: Inputs Develop Project Team: Tools and Techniques
» Manage Project Team: Tools and Techniques
» Manage Project Team: Outputs
» Communications Planning: Inputs Communications Planning
» Communications Planning: Tools and Techniques
» Communications Planning: Outputs Communications Planning
» Information Distribution: Inputs Information Distribution
» Information Distribution: Tools and Techniques
» Information Distribution: Outputs Information Distribution
» Performance Reporting: Inputs Performance Reporting: Tools and Techniques
» Performance Reporting: Outputs Performance Reporting
» Manage Stakeholders: Inputs Manage Stakeholders: Tools and Techniques
» Manage Stakeholders: Outputs Manage Stakeholders
» Risk Management Planning: Inputs
» Risk Management Planning: Tools and Techniques
» Risk Management Planning: Outputs
» Risk Identification: Inputs Risk Identification: Tools and Techniques
» Qualitative Risk Analysis: Inputs
» Qualitative Risk Analysis: Tools and Techniques
» Qualitative Risk Analysis: Outputs
» Quantitative Risk Analysis: Inputs
» Quantitative Risk Analysis: Tools and Techniques
» Quantitative Risk Analysis: Outputs
» Risk Response Planning: Inputs
» Risk Response Planning: Tools and Techniques
» Risk Response Planning: Outputs
» Risk Monitoring and Control: Inputs Risk Monitoring and Control: Tools and Techniques
» Risk Monitoring and Control: Outputs
» Plan Purchases and Acquisitions – determining what to purchase or acquire
» Plan Contracting – documenting products, services, and results requirements
» Request Seller Responses – obtaining information, quotations, bids, offers,
» Select Sellers – reviewing offers, choosing among potential sellers, and
» Contract Administration – managing the contract and relationship between
» Contract Closure – completing and settling each contract, including the
» Plan Purchases and Acquisitions: Inputs
» Plan Purchases and Acquisitions: Tools and Techniques
» Cost-Plus-Fee CPF or Cost-Plus-Percentage of Cost CPPC. Seller
» Plan Purchases and Acquisitions: Outputs
» Plan Contracting: Inputs Plan Contracting
» Plan Contracting: Tools and Techniques
» Plan Contracting: Outputs Plan Contracting
» Request Seller Responses: Inputs
» Request Seller Responses: Tools and Techniques
» Request Seller Responses: Outputs
» Select Sellers: Inputs Select Sellers
» Select Sellers: Tools and Techniques
» Select Sellers: Outputs Select Sellers
» Contract Administration: Inputs Contract Administration: Tools and Techniques
» Contract Administration: Outputs Contract Administration
» Contract Closure: Inputs Contract Closure
» Contract Closure: Tools and Techniques
» - Introduction Changes Contract Closure: Outputs
» - Project Life Cycle and Organization Changes
» - Project Management Processes for a Project Changes
» - Project Integration Management Changes
» - Project Scope Management Changes
» - Project Time Management Changes - Project Cost Management Changes
» - Project Quality Management Changes
» - Project Human Resource Management Changes
» - Project Communications Management Changes
» - Project Risk Management Changes - Project Procurement Management Changes
» Introduction Contract Closure: Outputs
» Project Life Cycle and Organization
» Project Management Processes for a Project
» Project Integration Management Contract Closure: Outputs
» Project Scope Management Contract Closure: Outputs
» Project Time Management Contract Closure: Outputs
» Project Cost Management Contract Closure: Outputs
» Project Quality Management Contract Closure: Outputs
» Project Human Resource Management
» Project Communications Management Contract Closure: Outputs
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