Lev Virine, far left, is a consultant at Intaver Institute, Calgary, Alberta, Canada.
Michael Trumper is business development manager at Intaver Institute.
1. Design schedules for projects within a portfolio.
2. Identify risks and enter them into the risk register. Risks may have different properties, including costs.
3. Assign risks to activities and resources. During
this stage, the risk probabilities and impacts
can be defined. The same risk, assigned to different activities and resources, may have different probabilities and impacts. The same risks
also may belong to different categories: For
example, the risk of fire may impact safety,
cost and schedule.
4. Identify risk mitigation and response plans and
associate them with activities on project schedules. These response plans may have risks themselves. For example, during the Alaskan Way
Viaduct Replacement project in the U.S. state
of Washington, a tunnel-boring machine broke.
To repair it, a 120-foot vertical shaft had to be
drilled down to the machine’s cutting head. This
risk response project delayed construction for
more than a year.
5. Identify relationships between risks and determine event chains. Risks can trigger each other
or be correlated with each other.
6. Create an event chain diagram (like the one on
the previous page), an easy way to visualize event
chains. Threats and opportunities assigned to the
activities are shown as arrows on the Gantt chart.
The size of the arrow depicts risk probability. The
color depicts impact.
7. Identify uncertainties in project activities that
are not part of the discrete risk events, and
define their cost and duration using three-point
estimates (best case, most likely and worst
case). For example, the quality of concrete has
delayed many construction activities. This delay
can be modeled using three-point estimates of
the duration of affected activities.
8. Perform Monte Carlo simulations of project
schedules. This means project schedules will be
calculated multiple times with different combinations of events.
After the calculation is performed, the analysis
allows us to:
1. Create a risk-adjusted project schedule. The
schedule can be associated with a certain probability that a project will be completed on time
and on budget. We can also determine a probability that certain milestones in terms of cost
and schedule will be met.
2. Rank risks based on their cumulative probability
and impact on multiple activities and resources.
Higher-ranked risks can be mitigated or avoided
first. Event chain methodology allows the ranking
of risks belonging to different categories separately or the calculation of a combined ranking
based on the relative importance of different categories. We can also identify critical event chains,
which can be broken if necessary.
3. Rank projects in a portfolio based on their
4. Identify the probability that certain mitigation
and response plans will need to be executed, so
these plans can be determined in advance.
Modern software significantly simplifies risk
analysis of portfolios. Risks can be constantly
tracked during the course of projects. A risk’s
probability and impact may change over the
course of a project; therefore, project and portfolio risk analysis should be performed on a
regular basis. The main advantage of project
risk analysis is that, if done properly, it provides
realistic project schedules, and improves both
the quality of project decisions and project outcomes. PM