Risk Simulation Challenges and Success Driven Project Management

Abstract

To be reliable, project risk simulation must take into account all existing constraints, simulate risk events that may occur and risk responses that management will apply in case they occur, simulate corrective actions that management will take in case project performance gets worse (or better) than expected.

The main problems with risk simulation tools include modeling the consequences of uncertainty rather than its source, missing correlations between probability distributions of project parameters, missing corrective actions people apply when risks occur and threaten project goals, using different leveling heuristics than those used for managing projects with resource constraints.

A correct project risk model can address the first three of the above problems but the last one is the most serious and cannot be solved if you are using a risk simulation tool which is external to project scheduling software you manage your project with. Probability distributions created by any external risk simulation tool are not reliable when project schedule has resource constraints.

Success probability is the probability of meeting project target. Success probability trends are the best performance indicators. Negative trends show that project contingency reserves are consumed faster than expected and corrective actions should be considered.