Risk Analysis Using The Risk Driver Method 2 Risk Analysis Using ✓ Solved

The Risk Driver Method involves risks from the Risk Register that are assigned to one or several activities affecting multiple risk drivers. This method describes steps drawn from traditional methodologies, where action lengths and expenses are given a three-point gauge reflecting the potential impact of several identifiable risks, which may not be exclusively recognized and monitored.

Risks selected for analysis with the Risk Driver Method are generally assessed as "high" or "moderate" from the Risk Register, typically strategic rather than technical risks. As risk data is gathered through interviews with project SMEs, new risks are identified and analyzed, totaling usually between 20 to 40 risks in large, complex projects. Identified risks can include risk events that may occur and vulnerabilities that will occur with uncertain outcomes.

During the Monte Carlo simulation, risks will occur or not based on their probabilities. The incidence of risks can significantly affect project activities, illustrated by potential effects represented as multipliers of activity duration and cost, e.g., low of 0.95, most likely at 1.05, and high at 1.25. These multipliers characterize the probability of impact. When risks are allocated to activities, if they occur, the action duration and costs are adjusted accordingly using these factors.

The correlation between activity lengths has been recognized as essential for accurately assessing project schedule risk analysis, especially since the influence of a risk may affect the duration of multiple activities, leading to correlation. If one risk affects two activities simultaneously, they become fully correlated. However, if separate risks influence a single activity but not others, the correlation diminishes.

The Risk Driver Method thus models how correlations between activity lengths arise, eliminating the need to estimate correlation coefficients individually for each pair of activities. The effects of risks are quantified as ranges of multiplicative factors applied to the duration or cost of affected activities. A given risk will either occur with provided probability or not, impacting the project accordingly.

In a case study, a simple construction project represents how risks are assessed to establish a schedule. For instance, a project to develop a new spacecraft aimed at investigating the moons of Jupiter depicts using the three-point estimates with risk drivers for gauging potential duration and costs of activities, alongside associated risks typically found in space missions.

This assessment uncovered an array of seven common risks along with their impact potential, reinforcing that funding complications from Congress and aggressive testing schedules pose significant threats, which would subsequently influence the overall project timeline.

Results from Risk Simulation

The Monte Carlo simulation results showed that traditional deterministic dates for project completion are unlikely to be achieved. The data indicated that a project completion date initially set for April 13, 2020, had less than 1% chance of being met without additional risk mitigations, with a realistic completion forecast moving to April 7, 2021, reflecting an approximately 11.8-month extension.

By concentrating on identified risks, significant benefits arise in project execution, allowing managers to prioritize risks for further mitigation. A structured approach to addressing these risks provides a clearer framework for enhancing the likelihood of timely project completion.

Critical Risk Focus

Identification of the most significant risks allows project managers to implement mitigation strategies. For example, cutting down risks related to congressional funding may reduce risk exposure over time. The process enables decision-makers to assess circumstances leading to potential delays while remaining responsive to unpredictable developments throughout the project lifecycle.

Overall, the Risk Driver Method remains beneficial in establishing clear risk prioritization, allowing projects to focus on the most impactful risks that can directly influence success or failure. Mitigation actions can then be evaluated for their financial implications and probable effects on project timelines.

References

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