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Why Safran Alliance Partner Craig Veteto Uses the Risk-driver Method

12th Apr 17

Topics: Webinar

On the 20th of April 2017, Safran Software Solutions hosted a live, free, and interactive webinar alongside Craig Veteto, discussing the value of risk within project management and the impact of the risk-driver method.

Craig is the president of Safran Alliance partner Global Project Solutions and has held senior project roles for over 30 years, with direct experience within capital risk analysis for over 12 years.

Learn from world-leading experts - watch our risk analysis webinar recording

As an expert on risk analysis and management, Craig has written a post that explores how the Risk Driver Method (RDM) can produce more actionable information, and why it should replace the Activity-Based Ranging approach for capital project risk analysis and management:

Why the Risk-Driver Method Beats Activity-Based Ranging

At its most basic, risk analysis and management aims to improve the predictability and performance of a project. The objective is to provide project leaders with the most meaningful and actionable information to drive better decision-making and mitigate threats to project success.

In supporting this goal, project leaders and risk managers will frequently use a method of risk management called activity-based ranging (ABR). This approach enables the user to assign risk distributions, schedule durations, and estimate costs.

However, risk analysis techniques are constantly evolving and improving, and a more modern approach can provide better value to the end users of the risk analysis output. In this post I will examine how the Risk-Driver Method (RDM) can produce more actionable information, and why it should replace the ABR approach for capital project risk analysis and management.

Activity-Based Ranging

ABR is focused on assigning risk ranges to schedule activities and cost items. The ranges may represent one risk, but more commonly are a combination of multiple risks and uncertainties. Because the risks are blended, there is no way to maintain line-of-sight to the impact of individual risks. The Monte Carlo simulation produces probable outcomes for tasks and cost items. These results are the effects of the impacts from risk and uncertainties. The underlying causes are not clear. And because the ranges are assigned to cost and schedule separately, an integrated view of probabilistic cost and schedule outcomes is not possible.

The Monte Carlo simulation provides a list of cost items or schedule activities, but the drawback of this limitation is that it doesn’t provide actionable information. Using the Activity-Based Ranging method, project teams will find it difficult to create a prioritised mitigation plan because there is a lack of clarity about what causes those risks in the first place. The output focuses on the effect rather than the cause and ranks each item in relation to one another, not in regard to cost and time.

Risk-Driver Method

The RDM is like ABR in many regards, but differs in one key element – instead of focusing on the effect of the risk, it focuses on the cause.

By identifying the cause of the risk, it becomes possible to quantify its impact in terms days and dollars and enables project teams to prioritise risks that pose the greatest threat to project success.

This method of risk analysis provides substantially more actionable information, and has achieved tangible results in a variety of real-world situations where ABR has been ineffective.

Real-World Examples

International Joint Venture

During an international joint venture project involving several partners from multiple nations, the capital cost was several billion dollars. The project end date had suffered significant extensions, and the team had struggled to accurately predict key events.

A schedule risk assessment, using the Risk-Driver Approach, was undertaken late in the execution phase to better predict the timing of a major start-up milestone several months in the future. The project team focused on the top-ranked risks, preparing plans to avoid or mitigate their impact, and they could achieve their start-up milestone within two weeks of the predicted P50 outcome.

Redevelopment Project

During a redevelopment project that had a duration of more than three years. The project team wanted to monitor risks to the schedule throughout the project lifecycle. Using the Risk-Driver Approach in concert with the evergreen risk register, the team conducted quarterly updates of the schedule risk model.

With the focus on the risk drivers rather than schedule activities, this was a much more efficient process. The quarterly updates allowed the team to monitor the risk profile across the lifecycle of the project.

The RDM put both projects on the path to success by providing additional value to the end-user. By changing ABR to the RDM, the overall process of cost and schedule risk assessment drove better decisions and in turn, produce more predictable project outcomes.

Improve Project Predictability and Performance Webinar

Alongside Safran I hosted a webinar that covered a range of topics including risk assessment and reporting, risk mitigation and risk model revision. These areas have been selected to help you improve your project’s predictability and performance, and reduce the risk of falling behind schedule or budget.

To get access to the webinar download, follow the link below.

Webinar Recording: Improve Project Predictability & Performance Watch Now