“every risk model is wrong but some are useful” this famous remark by a statistician, George E. P. Box in 1976 is still valid in the world of project risk management.
His point was that we should focus more on whether something can be applied to everyday life in a useful manner rather than debating endlessly if an answer is correct in all cases.
Having seen Monte Carlo simulation for risk and range analysis performed for cost and schedule for multibillion dollars, the multi-year project came with the result of less than 5% cost contingency and a few weeks in schedule contingency. We had to send the project team home and ask them to come back with a more realistic view of the project.
Setting overly-optimistic expectations with stakeholders are simply bad business and a clear sign that your risk model is not as comprehensive as it should be.
Implementing an effective risk model can improve your chances of successfully delivering a project on time and within budget. This is because once all risks have been carefully assessed, you can make more accurate project estimates – both in terms of scope, timer and cost.
While there’s no fancy tool that can replace true professional, experienced judgement, a robust risk model will be an invaluable tool throughout the project life-cycle.
What is your experience with project risk models and range analysis?
Love to hear your story in the comments below.