Project Risk Management:

Quantitative Risk Assessment

A Quantitative Risk Assessment (QRA) expresses the impact of risk on a project in numerical terms to provide a probabilistic measure of the risks that a project is exposed to. The aim of a QRA is to determine time and cost values that represent risk. Such information is frequently used to determine the cost and time contingencies of the project, which provide more accurate information for risk management and planning purposes.  As a QRA quantifies the impact of risks on the project cost estimate and schedule, it's therefore preferred over qualitative methods that express risk narratively or through qualitative rankings.

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The need

QRA’s are ideal for clients who seek to understand the degree of certainty of time and cost parameters associated with a project, program, or even portfolio.  Risks that are formulated through the qualitative risk analysis process can often not be completely mitigated, and risks involving uncertainty of accuracy of estimates always retain a degree of uncertainty.  A QRA enables decision-makers to make informed decisions, commensurate with their risk appetite, about the probability of achieving cost and time objectives.

In a Quantitative Risk Assessment (QRA) we use mathematical and statistical models to quantify the drivers of variations in costs and time estimates.
Our methodology includes risk quantification in the:
• Capital Estimate
• Project Schedule
• Project`s Financial Parameters

Five sources of risk that are analysed in a QRA:
• Level of Project Definition
• Estimate Accuracy
• Project-Specific Risks
• Economic Risks
• Systemic Risks

 

Lady at her desk

A QRA typically considers cost estimates for both capital and operational expenditure, i.e. capital expenditure and operating expenditure; as well as time estimates as expressed in the project schedule.

Capital Expenditure Estimate: The QRA informs the cost contingency that should be provided to cater for uncertainty to the likelihood of completing the project within a certain budget.

Time Estimate: The QRA informs the schedule contingency that should be provided to cater for uncertainty to the likelihood of completing the project within a certain timeframe.

Operating Expenditure Estimate: The QRA determines the contingency that should be provided to cater for uncertainty to the likelihood of operating the project’s product within a certain budget.

The need

QRA’s are ideal for clients who seek to understand the degree of certainty of time and cost parameters associated with a project, program, or even portfolio.  Risks that are formulated through the qualitative risk analysis process can often not be completely mitigated, and risks involving uncertainty of accuracy of estimates always retain a degree of uncertainty.  A QRA enables decision-makers to make informed decisions, commensurate with their risk appetite, about the probability of achieving cost and time objectives.

The need

QRA’s are ideal for clients who seek to understand the degree of certainty of time and cost parameters associated with a project, program, or even portfolio.  Risks that are formulated through the qualitative risk analysis process can often not be completely mitigated, and risks involving uncertainty of accuracy of estimates always retain a degree of uncertainty.  A QRA enables decision-makers to make informed decisions, commensurate with their risk appetite, about the probability of achieving cost and time objectives.

In a Quantitative Risk Assessment (QRA) we use mathematical and statistical models to quantify the drivers of variations in costs and time estimates.
Our methodology includes risk quantification in the:
• Capital Estimate
• Project Schedule
• Project`s Financial Parameters

Five sources of risk that are analysed in a QRA:
• Level of Project Definition
• Estimate Accuracy
• Project-Specific Risks
• Economic Risks
• Systemic Risks

 

A QRA typically considers cost estimates for both capital and operational expenditure, i.e. capital expenditure and operating expenditure; as well as time estimates as expressed in the project schedule.

Capital Expenditure Estimate: The QRA informs the cost contingency that should be provided to cater for uncertainty to the likelihood of completing the project within a certain budget.

Time Estimate: The QRA informs the schedule contingency that should be provided to cater for uncertainty to the likelihood of completing the project within a certain timeframe.

Operating Expenditure Estimate: The QRA determines the contingency that should be provided to cater for uncertainty to the likelihood of operating the project’s product within a certain budget.

The Implementation

Assessment

Inputs to the QRA are; the project risk register, the capital expenditure and operating expenditure estimates, the project schedule, and the project’s Work Breakdown Structure (WBS).

Analysis output

The primary output is a QRA report, which could, in turn, necessitate another iteration of the process, including refined QRA input parameters.

Implementation phase

At the end of the QRA process, the results are applied to the project business case to confirm that the project is still viable if the agreed contingencies are applied.

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ProjectLink provides an extremely valuable service to project teams, ensuring a better understanding the project risk profile, which I believe to be an essential component of project success!
Willie Greyling
GLPS
We, as the lead consultant on a large infrastructure project, have worked with ProjectLink for several years, where they have undertaken risk management, QRA, PDRI and other professional services. We have always found them to be professional and a pleasure to work with.
Gareth Simpson
Jones & Wagener
ProjectLink has provided excellent service during a recent multidisciplinary project. This service included Baseline Risk Assessments for project risk management, and Quantitative Risk Assessment for establishing contingency. ProjectLink’s contingency assessment included the processes of Systemic Risk, Discrete Risk, Cost Risk, and Schedule Risk assessment via their expert in-house developed system. They provided the full suite of services from workshop facilitation, analysis of results, and final reporting. ProjectLink engaged the client in a professional manner, and this was also event in the quality of their deliverables. I look forward for our next engagement.
Yunus Docrat
DRA

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