Risk Management

Problem

No matter how much effort is put into scheduling, a project rarely comes in on time and budget. The inherent uncertainty in nearly every task and the impact of risk events that may or may not happen make time and money projections, based on traditional scheduling, unreliable.

Solution

From the base schedule, model the uncertainties and risk events so that different scenarios for these risks can be created. Run Monte Carlo analyses to produce windows of probability (say 20%) for various outcomes (e.g. resource usage, costs, duration, cash flow, etc.) under various scenarios. Then assess and mitigate these risks through modification of the project’s execution plan. Until recently the sheer complexity and computing capacity required made such an approach impractical. However, recent software developments enable this process to be executed, managed and tracked by experienced analysts. Financial and resource data can be imported from other databases even if this data is not being used in the base schedule.

ROI

The software that we use is Pertmaster Risk Expert, a strategic tool to enable senior management to evaluate their company’s latent exposure to project risk and to formulate mitigation strategies to bring these risks within acceptable limits. For financial controllers this will become essential for developing an ICFR in conformance with MR 52-109 The investment in software, training and execution is normally under $100,000 whereas the potential losses avoided are many millions for large projects.

Emerald’s Experience

We have not only trained people from over 30 Canadian companies in this process but have executed the process for several of them, in order to speed up the embedment of the process in the company. Notably among the latter was a major process plant turn-around that enabled management to make decisions that avoided exposure in the order of tens of millions of dollars.

• Quantify your risk and contingency
• Mitigate your corporate exposure
• Audit your risk ‘due diligence'

For more information, please review the Pertmaster Risk Management brochure.