Monte Carlo Simulation for Project Cost and Schedule Risk Management

Assignment Task

 Aim 

General To apply risk analysis quantitative techniques to projects

Select a project. Can be from your work experience; or a social project (could be same project as Part A of Assessment 1, but best for learning purposes if the project is a real future project. Could use project from Time Management or Cost Management units).

Budget Report (using Monte Carlo Simulation)

NOTE: This is a formal project management document, not an academic assignment.

Produce a Budget Report document to the Project Sponsor, who is not knowledgeable about the cost estimating process or Monte Carlo simulation, that must strictly have has the following six sections (a-f)

• Introduction: e.g. executive summary (key results within the report), project scope, and any other relevant information
• Recommended Baseline Budget (excluding contingency), composed of 10-30 cost variables (This is a deterministic estimate based on most likely value for each cost variable, excluding risk events and contingency).

Structure and content of the cost model.

Explain the source of information used to produce this budget.

NOTE:
Once you have completed the above deterministic baseline budget, then conduct Monte Carlo Simulation (including correlations). Your cost model for MCS will:

1. Replace deterministic values in the Recommended Baseline Budget with probability distributions; and
2. add 2 specific risk events.

Brief explain your 2 risk events (one short paragraph each risk – briefly explaining what the risk event is. Do not discuss: causes; probability or consequences; or treatments ) 

(Note: you must chose/explain risk events that if they eventuate they will increase the sponsor’s budget)

Recommendation for Contingency (explaining reasons)
Sensitivity Analysis – based on the Tornado Chart, explain to the Sponsor how you will control and minimise the following:

• Most sensitive cost variable 
• Most sensitive risk event 

Compare and comment on the your cost results against the organisational policy that states “it is expected that the Baseline Budget should have an 80% probability of being with a range of -5/+10%,” 

Appendix:

1. Quick Output Report (no marks but should be referred to in answering above points)
2. The sponsor wants to understand MCS. To facilitate this, the sponsor has asked:

• Explain and justify the selected values (minimum, most likely and maximum) in the probability distributions for ONE of the cost variables 
• Explain and justify the selected values (minimum, most likely and maximum)  and probability of occurrence for ONE of the risk events 
• Correlation matrix. Select 2 correlated variables (i.e. one correlation) from your cost model. Explain why they might be correlated. And the likely nature and strength of this correlation 
  Professional Report Style Presentation 

This Risk Management has been solved by our PHD Experts at My Uni Paper.