DECISION TREE
Project Risk Management: A combined Analytic
Hierarchy Process and Decision Tree Approach
Dr.Prasanta Kumar Dey
CONTENT
What is the decision tree?
 The example of decision tree
 The advantage of decision tree
 The application of decision tree
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WHAT IS THE DECISION TREE?
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Decision tree is a decision support tool that uses
a tree-like graph or model of decisions and their
possible consequences, including chance event
outcomes, resource costs, and utility.
Decision tree is commonly used in operations
research, specifically in decision analysis, to help
identify a strategy most likely to reach a goal.
Another use of decision trees is as a descriptive
means for calculating conditional probabilities.
THE EXAMPLE OF DECISION TREE
THE ADVANTAGE OF DECISION
TREE
Are simple to understand and interpret.
 Have value even with little hard data.
 Use a white box model.
 Can be combined with other decision techniques.
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Project Risk Management: A combined
Analytic Hierarchy Process and Decision
Tree Approach
Dr.Prasanta Kumar Dey
CONVENTIONAL PROJECT MANAGEMENT
MODEL
PROPOSED PROJECT MODEL
RISK MANAGEMENT PROCESS
Risk identification
 Risk analysis
 Risk response
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RISK MANAGEMENT FLOW
METHODOLOGY
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Identifying the work packages for risk analysis.
Identifying the factors that affect the time, cost, and
quality achievement of a specific work package.
Analysis the effect and determining severity of failure
Driving various alternatives responses for mitigating
the effect of risk factors.
Estimating cost for each alternative
Determining the probability and severity of failure of
a specific work package
Forming a decision tree.
Deriving expected monetary value or the cost of risk
response in this case.
Selecting the best option statistical analysis.
IDENTIFICATION OF WORK
PACKAGES
Riving crossing
 Pipeline laying
 Stations construction
 Telecommunication and SCADA system
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WORK BREAKDOWN STRUCTURE
AHP MODEL FOR DETERMINING RISKING OF PROJECT
IDENTIFICATION OF RISK FACTORS
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Technical Risk
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scope change
technology selections
implementation methodology selection
Equipment risk
materials risk
Engineering and design change
Acts of God
normal natural calamities
 abnormal natural calamities
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Financial, Economical and Political Risk
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inflation risk
fund risk
changes of local law
changes in government policy
improper estimation
Organization Risk
capability risk of owner’s project group
 contractors failure
 vendor’s failure
 consultant’s failure
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Statutory Clearance Risk
environmental clearance
 land acquisition
 clearance from chief controller of explosives
 other clearance from government authorities
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LIKELIHOOD OF RISK IN A PROJECT
PROBABILITY AND SEVERITY OF RISK
FACTORS
DECISION ALTERNATIVES
do nothing
 carrying out detailed survey
 using superior technology
 engaging an expert project team
 taking all responses
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THE COST DATA FOR EACH PACKAGE
AGAINST VARIOUS RESPONSES
DECISION TREE FOR PIPELINE LAYING WORK
PACKAGE
DECISION TREE FOR RIVER CROSSING WORK
PACKAGE
DECISION TREE FOR STATION CONSTRUCTION
WORK PACKAGE
DECISION TREE FOR TELECOMMUNICATION AND
CATHODIC PROTECTION WORK PACKAGE
THE EMV FOR “ PIPELINE LAYING
PROJECT”
THE EMV FOR” PIPELINE LAYING
ACROSS RIVER”
THE EMV FOR ” STATION
CONSTRUCTION”
THE EMV FOR “TELECOMMUNTION AND SCADA
SYSTEM
THE DECISION EMERGE
RISK RESPONSES
To avoid
 To reduce
 To transfer
 To absorb
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CONCLUSION
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Risk management using a combined AHP and
DTA provides an effective means for managing a
complex project efficiently.
Risk management makes an effect to quantify
risk by modeling its probability and severity in
line with the perceptions of experienced project
executives subjectivity.
REFERENCE
http://en.wikipedia.org/wiki/Decision_tree
 http://www.mindtools.com/dectree.html
 http://zh.wikipedia.org/zhhk/%E5%86%B3%E7%AD%96%E6%A0%91
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