Modeling external risks in project management

Modeling external risks in project management

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Article ID: iaor20083006
Country: United Kingdom
Volume: 27
Issue: 4
Start Page Number: 961
End Page Number: 978
Publication Date: Aug 2007
Journal: Risk Analysis
Authors: , ,
Keywords: risk
Abstract:

To ascertain the viability of a project, undertake resource allocation, take part in bidding processes, and other related decisions, modern project management requires forecasting techniques for cost, duration, and performance of a project, not only under normal circumstances, but also under external events that might abruptly change the status quo. We provide a Bayesian framework that provides a global forecast of a project's performance. We aim at predicting the probabilities and impacts of a set of potential scenarios caused by combinations of disruptive events, and using this information to deal with project management issues. To introduce the methodology, we focus on a project's cost, but the ideas equally apply to project duration or performance forecasting. We illustrate our approach with an example based on a real case study involving estimation of the uncertainty in project cost while bidding for a contract.

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