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Why Perform Schedule Risk Analysis?

Practised by thousands of project controls professionals across the world, project scheduling is perhaps the most common discipline of project planning and control. Every project in every industry is managed according to a schedule, regardless of size or scale, so you'd think that projects are well-planned and successful. But so many projects overrun their schedules due to a lack of schedule risk analysis.

study of public transportation infrastructure projects published in the American Planning Association Journal found that 9 in 10 projects overrun their initial estimates and that overruns of between 50-100% are common.

Project overrun can often be attributed to a lack of in-depth analysis at the planning stage and a failure to investigate and test initial estimates. Not only can this lead to logistical headaches for contractors, but equitable adjustments can add up to spectacular sums for project owners, often amounting to millions of dollars.

To significantly reduce these issues, project leaders must perform schedule risk analysis. This helps deliver an equal focus on the three main variables in any project scheduling activity: duration, cost, and risk.

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All too often, risk is ignored or not considered due to its perceived difficulty, and this is the main reason for the overruns people experience. But in reality, schedule risk analysis and, by extension, risk, is easy to quantify. 

What is Schedule Risk Analysis?

Schedule risk analysis is a planning procedure that aims to improve the predictability and performance of a project. It helps project managers assess the likely impact of uncertainty and of individual risks on time to completion.

Used effectively, schedule risk analysis is a key weapon in any project manager’s arsenal that provides meaningful and actionable information to drive better decision-making.

5 Benefits of Schedule Risk Analysis

  1. Reduce Resource Costs

The essence of integrated schedule risk analysis is that “time is money.” In simple terms, the cost of non-labor resources is likely to increase if the task they're used for takes longer than planned.

With better analysis of time-to-completion and an accurate determination of project end-date, project leaders can better estimate the number of resources required and therefore reduce burn rate costs.

  1. Reduce Labor Costs

If an activity is originally scheduled to take 30 days and takes 50 instead, labor costs increase. Indirect costs such as the management of the project team will also increase if the project goes on longer.

Once more, with a better estimation of project end-date, project leaders can improve communication with their labor force and reduce unnecessary costs. 

  1. Identify High-Risk Areas

Traditionally, the aim of schedule risk analysis was to identify the greatest risks to project overrun. Today, it has evolved to be used to prioritize risk mitigation efforts.

Using quantitative risk analysis, project managers can focus key resources where attention is needed, making risk mitigation an available and practical tool for effective management.

  1. Accurately Determine Project End-Date

As time estimates are always subject to a margin of error, stakeholders often feel more comfortable with a range of duration for project activities rather than a precise calculation. Range estimates and risk assessment are complex and require analytical skills and basic knowledge of statistics.

But with a basic understanding of probability and distribution functions, project managers can better estimate the effects of unexpected events on the project outcome and more accurately determine project end-date. 

  1. Produce Actionable Information

Schedule risk analysis is only beneficial when it produces information that can be acted upon to minimise or mitigate the risks it's outlined.

While schedule risk analysis is often synonymous with techniques such as the Monte Carlo simulation, if it is to be truly effective it must include the impact of individual risks rather than just a measure of the uncertainty of schedule durations.

A basic Monte Carlo analysis provides a list of cost items or schedule activities but doesn't provide actionable information to inform key decisions.

Schedule risk analysis used properly provides substantially more actionable information and assesses the likely impact of individual risks to time-to-completion to provide tangible results in a variety of real-world situations.

The Value of Schedule Risk Analysis Software

Despite its significance in project planning, scheduling is a difficult discipline to master. Without the proper tools, training, and support, individuals thrust into the practice will struggle to overcome the many pitfalls along the path to success.

Using high-value software that allows for accurate scheduling, real-time analysis, and risk reporting can be a lifeline. Not only will it help project managers to identify and mitigate risks likely to lead to overrun, but it will also provide a valuable service for reporting likely risks to key stakeholders.

Platforms like Safran Risk simplify what would otherwise be an extremely complex procedure into a step-by-step process, allowing project managers to deploy quantitative risk analysis across their projects and empowering them to deliver better project outcomes.

Why Conduct Cost and Schedule Risk Analysis?