This article intention is to explain in a practical and “manual” manner how to perform a schedule risk analysis, how to simulate manually (what if analysis) the impact on the project timeframe and how to calculate a reserve for schedule based on risks.
Normally for the schedule risk analysis the companies buy a risk software license, but for this article purpose that specialized software is no needed in such way every Project Manager or any team member can do the analysis by themselves.
This Practical Schedule Risk Analysis (PSRA) technique is based on a well performed schedule, complying with the good identification of deliverables, activities and an excellent setting up of predecessors and successor.
The approach for this article is only to analyze and control the schedule based on the risks that can affect the critical path and project timeframe. It will not analyze the impacts related to cost but the Project Manager in real world projects must do.
Before to start the explanation of the PSRA I have to mention that Risk management is for every aspect of the project, not only for time impact, also for cost, quality, etc. But it is extremely important to identify risks in the critical path to avoid project finish out of planned date.
To continue reading this article the reader must have knowledge of Time management specifically Critical Path Method (CPM), Microsoft Project, and basic risk management concepts.
- 1 Practical Schedule Risk Analysis (PSRA)
- 2 Schedule Manual Simulation (What if scenarios)
- 3 Time Reserve Calculation For Schedule Based On Risks
- 4 Conclusions
Practical Schedule Risk Analysis (PSRA)
This Practical Schedule Risk Analysis (PRSA) is based on my experience managing projects and applying risk management concepts mainly to plan and control the schedule. I didn’t have access or training on specialized risk software, therefore that situation made me find “manual” and easy alternatives to perform a schedule risk analysis.
Let’s assume that the schedule has been set, all the deliverables, activities, milestones, predecessors and successors have been identified and the most important a critical path in place. Before you save schedule baseline you have to perform a risk analysis first in order to identify risk response plans to be added to schedule, to re analyze the critical path and control those critical path risks. Let’s see the steps to perform this technique.
First step – Identify risks on the critical path and plan risk response plans / Contingency plan
On this step you have to start to identify risks and causes that can affect your critical path, have a meeting with all the team members involved on the critical path and have a risk identification session.
Try to get from them the probability of occurrence and the impact in time of those risks, and then score them, in that way you can easily prioritize the risks (i.e. High, Medium, Low). After prioritization start to create risk responses to the risk list.
For the High risk scores it is necessary to set a contingency plan just in case that the initial response plan (i.e. avoid, mitigate and transfer) did not success and the risk occurs you know how to react immediately to avoid delays.
Second step – Include the risk responses to the project schedule or to a separate document for analysis
Once you have identified the risks that could affect the critical path of your project, add these risk responses to the schedule or if you wish have a separate document to control and follow up these actions (e.g. Risk Register) in order to avoid schedule slip.
Analyze if any of these risk responses affect the initial critical path. If they do affect it repeat Step 1 until you don’t find any affection on critical path.
Third step – Control the critical path and critical path risks
During project execution the Project Manager must do a follow up on the critical path, monitor its risks and execute the risk response plans. Also the PM must be prepared in case a high score risk occurs to activate the contingency plan designated.
There are some schedule compression techniques that can be applied as a risk response/contingency plan for schedule in order to be on time, those are Fast tracking and Crashing.
Fast tracking: a schedule compression technique in which activities or phases normally done in sequence are performed in parallel for at least a portion of their duration.
Crashing: A technique used to shorten the schedule duration for the least incremental cost by adding resources. Examples of crashing include approving overtime, bringing in additional resources, or paying to expedite delivery to activities on the critical path. Crashing works only for activities on the critical path where additional resources will shorten the activity’s duration. Crashing not always produce a viable alternative and may result in increased risk and/or cost.
Schedule Manual Simulation (What if scenarios)
This Schedule manual simulation is based on “What if analysis” and answers the following questions:
- What if this risk occurs, how will affect my schedule?
- What if this risk occurs, how can I re plan the remaining activities?
- What if this risk occurs, when my project will finish?
For this scenarios simulation you can use the MS Project and you can start to modify durations on the schedule and see the possible scenarios.
This technique is valuable for the activities with small or short float, in MS Project you can add a column for task float values. Starting to play or simulate this simulation will answer the following questions in order to take decisions or be aware of possible situation:
- What If this activity delay?,
- If there is a delay, will the critical path be affected?
- If there is a delay, will I have a new critical path?
Time Reserve Calculation For Schedule Based On Risks
There is one technique for Risk quantitative analysis called EMV (Expected Monetary Value) that can help you to calculate the contingency reserve for the schedule without using any specialized software.
EMV analysis is a statistical concept that calculates the average outcome when the future includes scenarios that may or may not happen. EMV for a project is calculated by multiplying the value of each possible outcome by its probability of occurrence and adding the products together.
EMV = Impact x Probability
An example is given below for better understanding:
|RISK||IMPACT (Time)||PROBABILITY||EMV (Time)|
Following with the purpose of this article, the risk A and B affect some deliverables on the schedule, the PM must to identify if those risks are related to the critical path activities or to the nearest critical path (i.e. activities with small or short float). Assuming that RISK A and B affect the critical path, then you can multiply IMPACT x PROBABILITY and get the EMV, the sum of the EMV column is used as a contingency reserve for the project. The 1.3d means that if all the risks occur to the project at the end the total project duration will be increased in 1.3 days, those days can be added to the schedule as a contingency reserve.
With this article the readers could learn how to perform a risk analysis on the schedule in a practical and manual way. Any specialized software is not necessary to do it, only to have some basic knowledge on CPM and Risk management is required. Lastly, it explains how to calculate a contingency reserve for the schedule.
 PROJECT MANAGEMENT INSTITUTE (PMI), a guide to the Project management body of knowledge (PMBOK® guide). Fifth Edition, PMI Publications, Page. 181
 PMI, PMBOK® Guide- Fifth Edition, PMI Publications, Page. 181
 PMI, PMBOK® Guide- Fifth Edition, PMI Publications, Page. 339