Real-time scenario planning
Risk is inherent in the delivery of any project. In our blog post describing the importance of Establishing The Right Team-Wide Risk Culture, we invoked former US Army Commander of JSOC (Joint Special Operations Command), Stanley McChrystal, by stating, “the greatest risk to us is us”. Too often, project teams fixate on the probability of risk rather than the nature of their vulnerability. Building on this idea, real-time scenario planning is the perfect tool for engaging with the team, agreeing which are the key risk drivers, brainstorming risk response scenarios, potentially decreasing likely exposure and improving the chances of project success.
In our earlier blog posts, we have also employed ancient wisdom. We cited Heraclitus in our Risk Culture post, and the axiom, the only thing that is certain is change. Following a quantitative risk analysis (QRA), the first area likely to feel the looming bow wave of change … are the initial QRA results themselves! There will likely be both economic and political pressure to try to achieve more with less. Safran Risk provides a transparent and traceable way, for the whole team, to visually review and capture alternative risk scenarios. When scenario planning, team members can formally agree which risk response measures should be enhanced or improved using empirical data or expert opinion. The goal here is to lower the anticipated cost of residual risk, so that it better aligns with organizational risk appetite, funding or other stakeholder constraints.
Seamless integration of cost and schedule models
Today’s modern breed of software allows a level of change and revision, within underlying risk simulation models, that was perhaps impractical or simply not achievable in the past few years. For a long time, risk practitioners have had no choice but to run separate cost and schedule models in parallel. Sometimes referred to as a serial cost and schedule risk analysis, where analysts attempt to stitch together results from disparate models, there is always some inadvertent watering-down of the likely time-dependent costs. Best-in-class analysis tools, such as Safran Risk, now offer the advantage of being able to capture and simulate uncertainty in both cost and schedule models, together, in real-time. This is the most accurate way to combine project team generated deliverables and estimate the possible cost of delay. Read about the pitfalls of selecting the Wrong Risk Tool in the eighth post in this blog series.
In the past, it was impractical if not impossible to calculate the likely cost or schedule impact of individual risks. Legacy tools such as Oracle Primavera Risk Analysis (OPRA) can take 5, 15, 30 minutes or longer to run analyses of any meaningful detail. Also, the convention for legacy algorithms is to report key risk drivers in terms of correlation coefficients. This is neither intuitive or insightful for many team members who are expected to engage with the project risk management process. Modern algorithms cannot only perform the same calculations in a matter of seconds, they can also re-run the simulation many times over, with one input removed during each iteration so that all team members may better comprehend the impact of risks expressed in more intuitive terms, such as cost or schedule. In the past, teams using OPRA may have spent more than a day, manually omitting one risk input at a time if they wanted to better comprehend the benefit of a revised risk scenario or contribution of individual variables. Using Safran Risk, the team can gather and glean that insight in near real-time (i.e. reporting on revised risk scenarios in less than a few minutes). Unsurprisingly, many teams find this accelerated means of decision-making and collaborative adaptability to be invaluable, as referenced in the introduction to this Capability Improvement series.
Avoiding the underestimation of risk
In the project management world, there is growing appreciation that, when it comes to critical decision-making, traditional heatmaps or qualitative scoring mechanisms are “worse than useless”. We laid that foundation stone in an earlier bog post - Collecting Data That Matters - when we highlighted the work of Douglas Hubbard and, more specifically, his book titled, The Failure of Risk Management: How it is Broken and How to Fix it. To help underscore the observation, Christian Smart in his book titled, Solving for Project Risk Management: Understanding the Critical Role of Uncertainty in Project Management, says, matrices are ideal for internally reporting the progress of managing risk but, “They should not be part of a quantitative risk assessment” since the method “significantly underestimates risk. As a result, it is not a credible way to assess cost risk when used by itself. A full probabilistic risk analysis is needed, that accounts for multiple sources of uncertainty.”
As an alternative to conventional, qualitative risk analysis tools, the visual tornado charts generated by Safran Risk, are built upon fully traceable and mathematically unambiguous quantitative data, they are best-practice, and exactly the level of detail business leaders or executives might be called upon to share with diligent and demanding stakeholders, such as insurers and financiers.
Crystal clear insight with data visualization
In the risk world, convention was for work by analysts to be kept behind the curtain and only cross-examined by analysts. New software offers data visualization that the whole team can engage with. Improved team engagement not only improves team alignment (around the level of justifiable contingency funding), it also enhances awareness of underlying vulnerabilities; who needs to do what and by when, in order to deliver on approved funding commitments.
Can you provide third party stakeholders with reports that highlight your fiduciary commitment to the efficient allocation of resources? The team of experts at Safran are ready to help you develop capability improvement opportunities that are best suited to you and your teams.