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Managing risk requires reliable, objective information
at your fingertips. RIAS gives you that capability
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Tracking Risks
Tracking Cost Effects
Risk Assessment Model
Monte Carlo Analysis
@ Risk Front End |
| Tracking Risks A risk is defined by the effects that will occur if it happens, and the likelihood that it will happen. A single risk can have multiple effects. Risk effects can usually be classified into a few common areas that are of significance to your organization. Cost or schedule or both are usually significant, and other areas might relate, for example, to client satisfaction, or health and safety, or product reliability. RIAS allows you to track cost and schedule effects and up to four additional areas which you can specify. Each risk effect that you elect to track can have its own user-definable scale, and each risk effect for each risk can be assigned a numerical rating. The individual ratings determine the overall risk impact. Risk likelihood is also assigned a numerical value. Impact and likelihood together enable the level of severity of each risk to be unambiguously defined and tracked. |
| Tracking Cost Effects RIAS tracks the cost effect of each risk in terms of an estimated cost increase (or decrease) that could occur, and a variance around that amount to represent the uncertainty in the estimate. (When you expect a cost increase of $50,000, do you mean exactly $50,000, or just somewhere roughly in that vicinity?) Cost effects can be tracked without reference to time, or can be tracked as a variable over multiple time periods. RIAS allows you to define up to 16 separate cost reporting periods, which can be calendar periods or user-definable periods such as Phase 1, Phase 2, etc. Costs and cost variances can be defined individually for each risk in each period. Risks can represent opportunities as well as threats. (If we do this now it will increase costs in the short term but will bring savings in the long term.) The multiple cost periods facility allows you to track the expected increases and savings over time, together with the uncertainties associated with them. |
| Risk Assessment Model RIAS uses a risk assessment model based on the Project Management Institute’s publication A Guide to the Project Management Body of Knowledge, 2000 edition. Details of the RIAS implementation can be found in “Qualitative Risk Assessment”, PM Network, Oct 2000, pp. 61-66. The RIAS risk assessment process begins with the selection of up to six risk effect areas, i.e. areas of significance to the organization which could be impacted by the occurrence of a risk. Assessment scales are set up for these areas so that predicted risk effects can be assigned numerical impact ratings for each risk effect area. Overall impact is determined by combining the individual impacts in each area. Weighting can be applied if some areas are considered to have greater significance than others. Likelihood is determined both by the probability of a risk occurring if no action is taken to deal with it, and intervention difficulty, i.e. the level of difficulty that would be experienced in attempting to prevent the risk occurring. However, for compatibility with some older conventions you can elect to use probability only. |
| Monte Carlo Analysis Monte Carlo analysis is a method of predicting overall costs, taking into account the uncertainty that may be associated with the individual cost estimates. It does this by looking at a randomly selected sample of possible cost outcomes, using a description, or model, of the uncertainty associated with each cost element. But herein lies the problem: how do you know what is an appropriate uncertainty model, and how do you apply it? RIAS solves this problem for you by phrasing questions in simple descriptive terms, and converting your answers to Monte Carlo models (you tell RIAS what to do and RIAS does the math). Both open and closed models are available. (Ref. “Open and Closed: The Monte Carlo Model”, PM Network, pp. 48-52, Dec 2001) Note: RIAS does not provide a Monte Carlo engine. To make use of the RIAS Monte Carlo facility you must have Palisade Corporation’s @Risk software installed on your system. However, what RIAS does for you is to automate the process of setting up the analysis model, which typically accounts for the bulk of the work involved in Monte Carlo analysis. |
| @Risk Front End RIAS provides a user-friendly front end to Palisade Corporation’s @Risk for Excel Monte Carlo engine, by automatically generating @Risk formulas. Monte Carlo is a powerful tool for budget analysis, providing answers such as the probability of overrunning a budget, or the amount of contingency needed for a given probability of completing the work within budget, or the probable effect on your budget of a poorly-defined task. @Risk is an excellent tool for this purpose. However, it requires special formulas to be generated and inserted into budget spreadsheets, which can demand considerable statistical and mathematical knowledge. The RIAS Monte Carlo module provides this know-how for you, automatically generating and inserting the required formulas. (Some of these formulas are almost impossible to generate without RIAS.) With RIAS you can set up and perform expert-level simulations on risk cost data and on standard budget data. |
| To learn more about RIAS Software contact admin@davion.com or give us a call at 1-888-420-4559. |
