Project risk management--by the numbers
Decision analysis methods are traditionally used in project risk management. This article describes the difference between the asset model (which should always be a stochastic model that incorporates probability distributions) and a detailed project model (which is usually deterministic and lacking distributions). Initially, an asset model might be developed within a feasibility study and used to provide the basis for justifying the project. The feasibility study often includes a preliminary but detailed project model that is used for calculating the cost and time distributions. The article concludes with a discussion of alternatives that can be used to improve the project's risk-versus-value profile based on the risk management functions that are prescribed in the PMBOK® Guide.