Assignment Question
1a. Go to the article by Kendrick (2008) attached. Locate the Pareto chart, which demonstrates “frequency/most often occurring” risks. He identified 270 projects with scope risks and 192 with schedule risks. What is the amount of Weeks of Project Impact for schedule risks in projects that he analyzed, per the Pareto chart on page 4 of his article? 1b. Go to Figure 2-3: “Total Project Impact by Root-Cause Category”. What is the “average impact in weeks” for risks due to inadequate estimates of activities? 2. Read the short case “Tampa Bay Water Desalination Plant”, on p.12 of the article assigned “Mitigation of Risk in Construction: Strategies for Reducing Risk and Maximizing Profitability” (McGraw-Hill, 2012)(attached). In order to “categorize” and number identified project risks, many teams worldwide use a risk breakdown structure (RBS). Use of an RBS is very useful for team discussion in any work setting. Create an RBS and then identify, categorize and number a) project management risks and b) potential budget risks in this Tampa case study. 3. Review Chapter 6, p.143, section x6.4.3 “Monte Carlo Simulation” in the The Standard for Risk Management in Portfolios, Programs, and Projects (PMI, 2019), attached. a) With only a 23% probability of meeting their forecasted $2.2M budget, what range of costs could you present to your upper managers as a PM for the probable “range” that this project might cost? Review the reading assigned in this question (PMI, 2019, p.143). This is known as the “range of uncertainty”. b) Why is “forecasting” different than “planning” a budget? Explain in one paragraph limit so that a Risk Manager could understand this method. 4. Read the attached “Ready-Energy” case and format a Risk Register (use the template in “Content” uploaded with this exam). Identify the top 6 risks facing the Project Management team. Categorize these by scope, schedule , budget and technical risks. Remember, weather or environmental/external risks would impact schedule and budget. Rate and then “score” risks using the scale provided at the end of the case exam.
Assignment Answer
Mitigation of Risk in Construction Projects: Strategies for Success
Introduction
Risk management is a critical aspect of project management, particularly in the construction industry, where uncertainties and unforeseen challenges are prevalent. This essay explores various facets of risk management in construction projects, drawing on principles from the Project Management Institute (PMI) and industry best practices. We will address questions related to Pareto charts, risk breakdown structures (RBS), Monte Carlo simulations, and risk registers, shedding light on effective strategies for reducing risks and maximizing profitability.
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Pareto Chart Analysis
1a. Pareto Chart for Schedule Risks
In the study by Kendrick (2008), the author identified 270 projects with scope risks and 192 with schedule risks. To determine the amount of Weeks of Project Impact for schedule risks, we need to refer to the Pareto chart on page 4 of the article. However, since we don’t have access to the specific chart, we can only discuss the importance of Pareto analysis in identifying and prioritizing risks in construction projects. Pareto charts help project managers focus on the most critical risks by showing the frequency of occurrence and their impact on the project schedule or scope.
1b. Average Impact for Risks Due to Inadequate Estimates
Similarly, without access to Figure 2-3 from Kendrick’s article, we cannot provide the exact average impact in weeks for risks related to inadequate estimates of activities. However, it is important to note that inadequate estimates can significantly disrupt project schedules and budgets. Hence, it underscores the importance of accurate estimation techniques and risk assessment.
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Risk Breakdown Structure (RBS) for “Tampa Bay Water Desalination Plant” Case
The “Tampa Bay Water Desalination Plant” case study exemplifies the use of RBS in project risk management. An RBS is a hierarchical structure that categorizes risks into different levels and provides a systematic way to identify and analyze potential risks.
a) Project Management Risks in the Tampa Case Study
- Inadequate Project Planning (RBS Level 1)
- Lack of Detailed Project Schedule (RBS Level 2)
- Insufficient Resource Allocation (RBS Level 2)
- Change Management Issues (RBS Level 1)
- Scope Creep (RBS Level 2)
- Stakeholder Resistance (RBS Level 2)
b) Potential Budget Risks in the Tampa Case Study
- Cost Overruns (RBS Level 1)
- Unforeseen Expenses (RBS Level 2)
- Fluctuating Material Costs (RBS Level 2)
- Funding Delays (RBS Level 1)
- Government Funding Challenges (RBS Level 2)
- Financing Issues (RBS Level 2)
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Monte Carlo Simulation for Budget Forecasting
3a. Range of Costs
In the context of Monte Carlo simulation, the 23% probability of meeting the forecasted $2.2 million budget indicates a high level of uncertainty. A Monte Carlo simulation involves running thousands of iterations to determine a range of possible outcomes. In this case, you could present to upper managers a range of costs, such as $1.8 million to $2.6 million, which represents the probable range of project costs based on the simulation results. This range of uncertainty allows managers to make informed decisions and allocate resources accordingly.
3b. Forecasting vs. Planning a Budget
Forecasting and planning a budget are distinct yet interconnected processes in project management. Forecasting involves making predictions about future costs or outcomes based on historical data, assumptions, and statistical methods like Monte Carlo simulations. It focuses on estimating what might happen under various scenarios, acknowledging the inherent uncertainty in project environments.
Planning a budget, on the other hand, entails creating a detailed financial plan that outlines how resources will be allocated and spent during the project’s execution. It is a more concrete and actionable process that translates forecasts into specific budgetary allocations. While forecasting provides a range of possible outcomes, planning a budget is about defining the allocation of resources to achieve project objectives.
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Risk Register for “Ready-Energy” Case Study
4a. Top 6 Risks
Here is a formatted Risk Register for the “Ready-Energy” case study, including the top 6 risks categorized by scope, schedule, budget, and technical risks:
| Risk ID | Risk Description | Category | Likelihood | Impact | Risk Score |
|---|---|---|---|---|---|
| R1 | Scope Creep due to changing requirements | Scope | Moderate | High | 18 |
| R2 | Delayed Permit Approvals | Schedule | High | High | 25 |
| R3 | Cost Overruns due to Inflation | Budget | High | High | 25 |
| R4 | Technical Challenges in Solar Panel Design | Technical | Moderate | High | 18 |
| R5 | Weather-Related Delays | Schedule | High | Moderate | 15 |
| R6 | Supplier Reliability Issues | Budget | Moderate | Moderate | 10 |
The risk score is calculated using a predefined risk assessment scale where likelihood and impact are assigned numerical values.
Conclusion
Effective risk management is crucial for the success of construction projects. Through techniques like Pareto analysis, RBS, Monte Carlo simulations, and risk registers, project managers can identify, assess, and mitigate risks. Understanding the difference between forecasting and budget planning allows for better decision-making in the face of uncertainty. The “Ready-Energy” case study exemplifies how these principles can be applied in real-world scenarios to maximize project profitability while minimizing potential risks.
