Project Risk Analysis is concerned with the assessment of the risks and uncertainties that threaten a project. Project schedules are often created using the Critical Path Method (CPM). The work needed to perform the project is broken down into smaller tasks. The duration of each task is estimated, and any logical dependencies between them identified and represented in a project network.
From this network, the CPM analysis estimates start and finish dates for each task. Unfortunately this analysis tends to produce optimistic results but fortunately this problem can be addressed using Project Risk Analysis.
The two main causes of optimism in CPM schedules are:
As many studies have shown, people tend to be overly optimistic in their estimates of task durations.
Even if the estimates of individual task durations are not overly optimistic, they are subject to uncertainty and sometimes these uncertain durations combine in a way which causes an additional bias called merge bias.
Project Risk Analysis uses the very same network that CPM uses, but substitutes a probability distribution for the single-point estimate of each task duration. This requires the user to enter at least two values for each task, an optimistic and a pessimistic estimate of the duration.
The thought process that Project Risk Analysis entails – for example, thinking of what might go wrong — goes a long way towards correcting the first problem mentioned above, namely the natural tendency for people to underestimate the time it will take to accomplish a task.
The subsequent analysis of this data – using a risk analysis product like Full Monte – corrects the second problem. Merge bias results when multiple tasks converge in project network, that is to say when one task cannot start until several other parallel tasks are completed.
Since this task has to wait for the latest of the predecessors, and since this may not always be the same one, the expected start of the successor is later than the latest expected finish of the predecessors. This is the cause of merge bias. It is properly modeled by Project Risk Analysis but not by CPM (nor by a modified version of CPM called PERT).
Project Risk Analysis therefore addresses the two main causes of optimism in schedules based upon deterministic CPM, so the schedules it creates have a better chance of being executed successfully.
If you would like further information about our Project Risk Analysis software, please contact us at 281-971-9825.