The results of Project Risk Analysis performed without considering resource limitations are not reliable.

Project practitioners are usually aware that a risk may impact cost, completion date, and resource demand. However, that there is an opposite correlation between resources and risks.

Resource limitations may impact risk consequences.

Let’s review the following scheduling quiz:

Project with resource constraints and a risk

A project has two streams of work: A->B and C->D and will be completed when both streams are completed.
The project has activity uncertainties, resource uncertainty and one risk.
Activity uncertainties
The duration of each activity is estimated as a range. Let’s consider 2-point estimations to keep it simple.
Resource uncertainty
Activities A and C require the same skill. So, two resources are needed to perform these activities in parallel. However, it is unclear if the second resource is going to be available or not.
Risk
The project has a risk associated with Activity D. Activity D will take one day longer if the risk materialises. There is an opportunity to fully mitigate the risk, but it requires additional expenses.
Project priorities and goal

The goal is to complete the project as soon as possible with the fewest expenses.
The project team needs to determine the overall duration (as a range) and decide whether it is worth mitigating the risk.

Optimistic project plan

Let’s review an optimistic scenario: each activity takes the least possible time, there are two resources ‘Resoucre 1’, and the risk is mitigated. This project takes 12 days.

Optimistic plan with the resource constraint

How could the plan be optimised if only one resource is available (to perform Activities A and C)? There are only two possible options: to either delay Activity A or Activity C.

Option 1a: delay Activity A

Option 1b: delay Activity C

It seems obvious to choose Option 1a, mitigate the risk, and complete the project in 12 days.

Pessimistic project plan

The project plan without resoucre constraints based on pessimistic durations doesn’t look dramatically different.
The critical path is the same as it was in the optimistic scenario. It still makes sense to mitigate the risk and complete the project in 14 days.

Pessimistic plan with the resource constraints

Let’s add the resource constraint to the pessimistic scenarion. There are still only two possible options: delay Activity A or Activity C:

Option 2a: Delay Activity A

Option 2b: Delay Activity C

It still makes sense to complete Activity C before Activity A. However, please pay attention to Activity D. This activity is no longer on the resource critical path, so incurring extra expenses for risk mitigation doesn’t make sense. If Activity D takes one day longer, it will not delay the project completion date. The consequence of the risk has changed!

Conclusion N1: A change in resource allocation in one part of the schedule may change risk consequences in another part.

This is a very simple example, and we can track the impact of each uncertainty on all project attributes and the overall result. Real-life projects are more complex. Even small projects have uncertainties, resource limitations and risk events. As a result, the Resource Critical Path is volatile. Without a dynamic delivery model, it is usually impossible to understand how a change in one project parameter impacts other project parameters and project objectives. 

If the consequences of evaluated risks may change after resource levelling, risk evaluation needs to be repeated after each levelling cycle. However, risk re-evaluation is a time-consuming task, and it would be beneficial if a project delivery system could automatically identify changes in the risk profile after re-levelling is performed. 

 

Quiz answers

How long does it take to deliver this project?

If the delivery plan is optimised and used to drive project decisions, it takes 12-16 days, depending on uncertainties. However, wrong decisions can extend the project to 20 days (25%).

Should the risk be mitigated?

This question is not as simple as it may sound and has no YES/NO answer.

Depending on uncertainties, the risk may impact the overall project duration and need to be mitigated, or in some circumstances, the mitigation would not bring any benefits but rather would cause extra expenses.

We found two answers based on edge-case scenarios:

– The optimistic scenario: definitely mitigate risk.

– The pessimistic scenario: definitely not mitigate risk.

These two extremes give an an opposite answer. Optimistic and Pessimistic scenarios have a nearly zero chance of occurring. The actual progress will be somewhere in between these two extremes.

Additional information is required to enable a data-driven decision .

Risk Period

The quiz specified that if the risk is materialised, it takes one day longer to complete Activity D but it doesn’t explain the risk period. A potential period could be:

  • Before Activity D start date;
  • Any time during Activity D period;
  • Specific day during Activity D.

Mitigation decision date

When is the latest date to decide on a risk mitigation strategy? It would be good if we could postpone our decision as we may be better informed by that time.

For example, the above analysis shows that if two resources are available, the risk has to be mitigated regardless of other uncertainties. So, when project commenced we may have some addional information that is not directly related to the project risk but couls help us to choose the best mitigation strategy.

Conclusion N2: Risk mitigation strategy is a variable parameter, not a stable risk characteristic.

Probabilistic approach
An alternative approach is to make a probabilistic decision. The project can calculate the chance the risk impacts the completion date by clarifying risk probabilities and building a probabilistic project delivery model. This approach can provide some vital information for project decisions. However, projects need to be extremely careful with this approach, as a low-quality model may show measling results and drive wrong project decisions.

Data-driven decisions require development of Dynamic Deliery Model that correctly shows how primary uncertenites and risks may impact project objectives (time, cost and benefits).

Could different project teams be using exactly the same initial information to develop a model that gives accurate and consistent outcomes? Could it be an another quiz?

Alex Lyaschenko

PMO | Portfolio Planning & Delivery | PMP | P3O Practitioner | AgilePM Practitioner | Six Sigma