project risk analysis

[Majid]

I am interested in risk analysis of projects. I mean risk assessment
beside economic feasibility study. Surveying our library, I found
'Project Risk Management' Chapman (2004) and read it. It has a good
general perspective of risk management and gives a step-by-step
methodological approach. However it doesn't exactly give me a technical
view ie the statistical background to assess a project's risk.

Due to lack of experience in the field I am puzzled how to take the
path forward. I know that I should find the probability distribution of
a risky unwanted event but I know no other way than expert opinion or
just past experience on frequency of the event. It is mentioned that a
software armed with Monte Carlo method like @risk or MainOpt is useful
but I have no access to them.

Let's mention that my major is economics, MA and engineering mechanics
BS. I have recently studied project management and passed a course for
strategic management.

Thanks for the help

 

[John]

I am interested in risk analysis of projects. I mean risk assessment
beside economic feasibility study. Surveying our library, I found
'Project Risk Management' Chapman (2004) and read it. It has a good
general perspective of risk management and gives a step-by-step
methodological approach. However it doesn't exactly give me a technical
view ie the statistical background to assess a project's risk.

Due to lack of experience in the field I am puzzled how to take the
path forward. I know that I should find the probability distribution of
a risky unwanted event but I know no other way than expert opinion or
just past experience on frequency of the event. It is mentioned that a
software armed with Monte Carlo method like @risk or MainOpt is useful
but I have no access to them.

Let's mention that my major is economics, MA and engineering mechanics
BS. I have recently studied project management and passed a course for
strategic management.

Thanks for the help

Majid,
When you get right down to it making a risk assessment is always going
to be subjective. The process can be made a little easier with some risk
assessment tools but the process will never be an exact science.

In my experience perhaps the best way to assess risk is with a panel of
experts who have knowledge in the area of interest. At my company we had
assessment aids that helped the process along. The aids consisted of two
parts - a chart for probability of occurrence (pf) and a chart for
potential consequences (cf). Each chart had a series of categories on
one axis and a numeric level from 0.1 (low) to 0.9 (high) on the other
axis. For each item being addresseed an assessment was made to find the
appropriate category and level for the pf factor. Then an assessment was
made to assign a value for the cf factor. The overall risk assessment
for the item was the product of those two (i.e. pf x cf = risk factor).
Risk factors from "0" to ".81" were divided into general groups of low,
medium and high. Periodic risk review board meetings were held to review
each program risk, adjust assessments as necessary and recommend risk
abatement plans for medium and high risk items.

Another method that is popular in the classical risk assessment approach
is the use of Monte Carlo simulations. You mentioned a couple of adjunct
software applications that are available. Another that comes to mind is
Risk+ (cs-solutions.com) but it isn't cheap. One entry level Monte Carlo
solution that is cheap (free) is the Monte Carol simulator you can
download from fellow MVP, Jack Dahlgren's website at:
http://masamiki.com/project/macros.htm
Look for Jack's macro called: Blackjack Monte Carol Simulator.

Hope this helps.
John
Project MVP

 

[onlyjazz]

Majid
I totally understand what you mean, I was in a similar place on a risk
assessment - being thoroughly confused. I came across an interesting
and I think extremely
useful methodology a few days ago - at www.software.co.il

It is a practical way of assessing risk in legacy systems, but I think
it's applicable methodology to a number of different problem domains.

Will