Applying Monte Carlo Analysis – Part 4
Application of risks to schedule activities
It is important to consider what affect applying risks to activities will have.
A Monte Carlo analysis works by turning the risk on and off at random based on their probability of occurrence. Each time the risk is “on”, and impacts will be applied to the activities that it is linked to.
The effect of the risk will vary in line with the probability distributions described above.
A risk link to many activities will, when it is “on” affect all the activities that it is linked to. If the risk ones, for example, lack of resources, is it really applicable to all the activities it is attributed to?
The calculation will assume that this is the case, rather than the lack of resources affecting just one, or some, of the activities.
The QSRA output
The first analysis – duration uncertainty
As previously discussed, the first analysis undertaken applies the duration uncertainty calculations. The graphics and statistics in the diagram below detail the outcome of this on a specific milestone which defines the end date of this section of work.
The result of this analysis can be shown in a probability charts. Charts can be viewed for the overall project await a number of key milestones or at other points throughout the project.
Different “risk appetites” are also, or more, dependent on the type of work. For example possessions or shutdowns would commonly want P90, standard construction work P80 four schedule risk and uncertainty.
However, cost risk might well be P50, which would never be acceptable for the schedule.
Different organisations will have different risk appetites and use different percentage points (P) to measure against, and for example, the duration uncertainty probability chart shown below uses the P50 and P80 boundaries.
P50 means a 50% chance of success, P80 means there is an 80% chance of success. In the diagram below, the required completion date is 10th of May 2016.
The results in the chart show that:
There is a probability of achieving the current schedule date of 28% (the yellow line)
The P50 date is shown as 14th May 2016 (blue line)
But in addition the p80 date is also shown as 14th ay 2016 (green line)
The activities that have the most influence on this outcome can be displayed in a tornado chart as shown below.
It is worth analyzing the tornado chart prior to proceeding with the exercise to ensure that the results are meaningful and credible activities are identified as having the greatest influence on the result.
The tornado chart diagram shows the impact in days, but sometimes this can be shown in percentage terms: