Managing Project
Planning Risk
Fouzi A. Hossen
PG Conf /1
© F.A. Hossen, M&S Engineering
University of Newcastle upon Tyne
Overview
• Risk and Uncertainty
• Objectives
• Project risk management PRM
process
• Capital good companies
• Product structure
• Industrial case study
• Conclusions
PG Conf /2
© F.A. Hossen, M&S Engineering
University of Newcastle upon Tyne
Risk
•
•
Risk is defined as “the exposure to
the possibility of economic and
financial loss or gain, physical
damage or injury, or delay as a
consequence of the uncertainty
associated with pursuing a particular
course of action” (Chapman et al.,
1991).
Project risk exists where uncertainty
threaten the project’s ability to meet
its objectives within the given
limitations (CCTA,1996)
PG Conf /3
© F.A. Hossen, M&S Engineering
University of Newcastle upon Tyne
Uncertainty
• Uncertainty is defined as “the
unknown future event that cannot
be predicted quantitatively within
useful limits” (APICS, 1998, p98).
• Uncertainty has a common
meaning which is the lack of
certainty; risk also has general
meaning which is the exposure to
loss or injury as a consequence of
uncertainty (Chapman et al., 1987).
PG Conf /4
© F.A. Hossen, M&S Engineering
University of Newcastle upon Tyne
Objectives
The objectives of the paper are to:
• Review the literature relating to the
project risk management process;
• Investigate the risk associated with
project scheduling that result from
activity duration uncertainty;
• Analyse the activity completion time
risk quantitatively by developing a
simulation model.
PG Conf /5
© F.A. Hossen, M&S Engineering
University of Newcastle upon Tyne
Project risk management
PRM process
The PRM process is defined as “the
process of taking management action in
order to respond appropriately to all
identified risks to maximise the
likelihood of the project meeting its
objectives within its constraints, by
monitoring risk exposure and adjusting
project strategy to keep risk within
acceptable levels” (CCTA, 1996, p12).
PG Conf /6
© F.A. Hossen, M&S Engineering
University of Newcastle upon Tyne
Project risk management
PRM process
• Risk identification
• Risk Analysis
- Qualitative risk
analysis
- Quantitative risk
analysis
• Risk mitigation
• Risk Monitoring
and follow up
Project risk Management process
PG Conf /7
© F.A. Hossen, M&S Engineering
University of Newcastle upon Tyne
Capital Goods Companies
• Product and process usually
complex
• Customised to meet individual
customers requirements
• Engineer-to-order
• Low production volume
PG Conf /8
© F.A. Hossen, M&S Engineering
University of Newcastle upon Tyne
Product Structure
See the product structure
considered in this study
PG Conf /9
© F.A. Hossen, M&S Engineering
University of Newcastle upon Tyne
Industrial case study
Component finishing time
Assembly finishing time
PG Conf /10
© F.A. Hossen, M&S Engineering
University of Newcastle upon Tyne
Industrial case study
Normal probability plot of final product
finishing time
PG Conf /11
© F.A. Hossen, M&S Engineering
University of Newcastle upon Tyne
Industrial case study
Due date
0.1 Sd
Final product finishing time
0.2 Sd
Final product finishing time
0.3 Sd
Final product finishing time
PG Conf /12
© F.A. Hossen, M&S Engineering
University of Newcastle upon Tyne
Industrial case study
Due date
Sd 0.1
Final product finishing time
Sd 0.4
Final product finishing time
PG Conf /13
© F.A. Hossen, M&S Engineering
University of Newcastle upon Tyne
Conclusions
• Capital goods are customised and the
processing times are uncertain.
• The uncertainty becomes cumulative
throughout the production stages.
• Due to the uncertainty and complexity
of production in ETO products, it is
difficult to estimate accurately the
product lead-time.
PG Conf /14
© F.A. Hossen, M&S Engineering
University of Newcastle upon Tyne
Conclusions
• The effect of cumulative uncertainty is
to shift the distribution of product
completion time to the right. As a result
of this the probability of delivering a
product on due date becomes very
small.
• Increasing of the standard deviation
from 0.1 to 0.2 and 0.3 times the mean,
the distribution of product completion
times are increasingly shifted to the
right and the uncertainty is additionally
increased.
• Managers need to minimise the risks
associated with these uncertainties.
PG Conf /15
© F.A. Hossen, M&S Engineering
University of Newcastle upon Tyne
Acknowledgement
I would like to thank my supervisor,
Dr C. Hicks, for his advise and Dr P.
Pongcharoen for his support.
Any Questions?
PG Conf /16
© F.A. Hossen, M&S Engineering
University of Newcastle upon Tyne