BUS606: Operations and Supply Chain Management

Schedule Risk Analysis

Schedule risk analysis is a project management method for assessing the risk of a baseline schedule and forecasting the impact of time on project objectives. The processes of risk analysis include planning risk management, identifying potential risks, qualifying and quantifying potential risk probability and impacts on a schedule, combining information to determine the probability of schedule completion, defining risk responses, and monitoring and controlling action plans. The project schedule risk analysis framework for this study, which mainly comprises 10 steps, and its workflow are illustrated in Figure 2.

Figure 2

Project schedule risk analysis framework.

Step 1. A risk workshop is convened by the project manager, and experts who are experienced in executing EPC projects are invited. Workshops provide a good environment for sharing information and having a cross-disciplinary discussion. The objectives of a risk workshop are as follows: to verify and analyze a project schedule, to identify risk items, to define risk basic information, to evaluate risk impact and probability, to develop a mitigation plan, to decide on risk response strategies, and to estimate risk control results.

Step 2. A risk register is used to record all required data for each risk item, such as risk type, status, mapping result, risk impact level and frequency, mitigation action, and expected risk result after mitigation.

Step 3. Primavera P6 (revision 8.3) and Primavera Risk Analysis (revision 8.7) software programs are used to build the risk schedule structure.

Step 4. Schedule validation is conducted. Prior to conducting the schedule risk analysis, the maturity and readiness of the project should be verified to avoid the factors that influence risk assessment, such as logic errors, open-ended activities, negative lags, and start-to-finish links. Meanwhile, unnecessary constraints should be removed. Schedule validation may also increase the reliability of risk assessment.

Step 5. A risk model is developed. A risk model development comprises two parts: risk identification/assessment/response and risk mapping.

Step 6. After potential risks have been discussed with the owner, project experts, and department staff, all of the risks are recorded in the risk register, together with other details, such as probability $(P)$, impact $(I)$, and scoring (Risk $=P * I$ ) indicated by the risk matrix, for risk premitigation and risk postmitigation plans. This process is called qualitative risk analysis. Afterward, quantitative risk analysis involves identifying and calculating the effects of risks, determining the probability and impact for cost and schedule mitigation, and implementing response actions. This process is time and labor intensive and requires all participants to exert effort. However, the assessment results are useful for subsequent schedule risk assessments. All risks in project activities should be identified upon the completion of the potential risk assessment. Afterward, risk assessment software can be used to import the impacts and probabilities of the risks for simulation and predict the completion date of the project.

Step 7. Premitigation and postmitigation plans are developed to analyze the identified risks and model different scenarios. Risk ranges are established in workshops with more than 20 participants rather than through interviews with one or only a few participants. Stage 1. Preanalysis check: a preliminary verification is conducted to identify risk-sensitive activities and their influences on the total project schedule given the uncertainty of the project activities. These activities are prioritized in the subsequent risk analysis and control. In the preanalysis process, the remaining duration of different activities is determined after a discussion, and a three-point estimate is commonly adopted to distinguish optimistic, most likely, and pessimistic activity periods. Stage 2. Premitigation check: in addition to the uncertainty of the activity itself, the effects of the risks are considered. Stage 3. Postmitigation check: in addition to the uncertainty of the activity itself and the effects of risks, risk mitigation effects are considered.

Step 8. Monte Carlo simulation is then performed via the Primavera Risk Analysis software program to determine the effects of the aforementioned risks on the schedule.

Step 9. The risk responses are defined. The action owners monitor and control the action plans.

Step 10. The schedule is finalized. A risk analysis report is provided to monitor all potential risks.

After schedule risk analysis, the sensitive schedule risk items on the critical path can be identified through Monte Carlo simulation. The activities on the critical path can be further analyzed by a proposed mathematical model to obtain the optimal solution for the project time-cost trade-off strategy.