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106 that the project will cost as little as $640 million and as much cally identify risks, quantify uncertainty in project perform- as $720 million. ance (e.g., for generating ranges for total project cost and schedule), and quantify the significance of each risk (e.g., for subsequent risk management cost-benefit analysis). Tips Monte Carlo analysis can provide insights into complex What is it? projects that might not be apparent through conventional es- timating and scheduling techniques. It can provide cost and These workshops are conducted to identify and rank proj- schedule ranges with graphical outputs. It also can provide in- ect risks (or quantify uncertainty in the case of a quantitative sights into which risks have the greatest influence on these analysis). They can involve a variety of estimators, project ranges. All too often, however, the output is used only for team members, project stakeholders, discipline experts, and go/no-go decisions or a one-time generation of a baseline cost. risk analysis facilitators. Estimators and project managers should leverage this infor- mation in a holistic risk management process. The results can Why use it? be better project performance interims of cost, time, and uti- lization of resources, but only if it is used to help actively man- A comprehensive risk analysis requires the elicitation of age the project development process and control project costs. risks from all project team members, as well as other stake- Monte Carlo analyses should only be conducted or facili- holders that can potentially influence the project. A focused tated by trained professionals. It is important to understand workshop works well to assemble all those who can influence that the output of the model is only as accurate as the as- the project with the goal of identifying risks and helping the sumptions used to generate the output and the ability of the project team understand and plan for project uncertainty. model to represent the actual project. What does it do? Resources The products of risk workshops vary depending upon the Caltrans Office of Statewide Project Management Improvement (2007). complexity of the project being studied, the current phase in Project Risk Management Handbook: Threats and Opportunities, the project development process, and time available for the 2nd ed., May 2007, Caltrans, Sacramento, CA. http://www.dot. ca.gov/hq/projmgmt/guidance_prmhb.htm. workshop. Common products are listed below from least to Federal Transit Authority (2004). Risk Assessment Methodologies and most complex: Procedures. Report for the Federal Transit Administration, Project Management Oversight under Contract No. DTFT60-98-D-41013, A listing of project risks with complete descriptions; Washington, D.C. A quantification of risk for both probability and impact; Federal Highway Administration (2004). Major Project Program Cost A range of project cost and schedule to support contin- Estimating Guidance, Federal Highway Administration, Washing- ton, D.C. gency estimates; Molenaar, K.R. (2005). "Programmatic Cost Risk Analysis for Highway Initial risk mitigation plans; and Mega-Projects," ASCE Journal of Construction Engineering and Preliminary risk register and risk management plan. Management, 131(3), 343-353. Project Management Institute (2004). A Guide to Project Management In addition to these products, risk workshops generally help Body of Knowledge (PMBOK Guide), The Project Management In- stitute, Newton Square, PA. to align project team members' understanding of project risks Washington State Department of Transportation (2008). CEVP and and focus resources in the areas that are most affected. Cost Risk Assessment (CRA) website. http://www.wsdot.wa.gov/ Projects/ProjectMgmt/RiskAssessment/ (Viewed June 1, 2008). When to use it? Risk workshops are valuable in each project development R3.6 Risk Workshops phase. In the earliest phases, they benefit risk identification, Risk workshops are formal meetings where estimators, and in the latest stages they benefit risk management. When project team members, subject matter experts, and risk analy- used, the workshops must be conducted well in advance of fi- sis facilitators work together to identify and analyze project nalizing the cost estimate because project managers and cost risks. Project stakeholders also can be invited to identify risks, estimators need sufficient time to incorporate the findings if appropriate. The workshops can focus on either qualitative into the project plans and estimates. Risk workshops involv- or quantitative risk analysis techniques. Qualitative analyses ing expert facilitators are typically required for large or com- typically identify and rank risks. Quantitative analyses typi- plex projects that meet one or more of the following criteria: