Practical Risk Assessment For Project Management

Book reviews

Practical Risk Assessment for Project Management S Grey Wiley 1995 140 pp £22.50 ISBN 0 471 93979 X This book describes how to make a quantitative evaluation of the uncertainty affecting cost, schedule and revenue estimates in a project based business. The text is written in an informal style, often in the second person, and assumes little or no previous knowledge of risk analysis. Chapter 1 and the preceding Introduction briefly outline the risk management process, various approaches to risk assessment, the role of the risk analyst and the payoffs from risk analysis. Chapter 2 provides a basic, non-technical introduction to probability density functions, the concept of dependence and the mechanics of Monte Carlo simulation. Certain simplifications are adopted for the remainder of the book, such as exclusive use of triangular probability density functions, and either zero or 100% correlation between variables. Chapter 2 also introduces the software tool @RISK and the rest of the book assumes that the reader will be using @RISK, either in Lotus 123 release 2 or Excel 4. The core of the text is Chapter 3 on cost risk and Chapter 4 on schedule risk. Each of these chapters is 35 pages long and so together they make up half the book. Chapter 3 provides a stepby-step discussion of cost risk quantification starting from a work breakdown structure and an extended worked example and commentary on spreadsheet calculations and layout. This is followed by a discussion of practical issues connected with obtaining realistic data, contingency levels, and qualitative identification of sources of risk. Chapter 4 on schedule risk shows how to build an @RISK model of a project's activity network in order to evaluate uncertainty about project duration. As in Chapter 3 the discussion uses plenty of diagrams and spreadsheet layouts to illustrate different modelling concepts, such as probabilistic branching. Chapter 4 closes with further comments on data estimation, and a brief discussion of external dependencies and selling confidence. Chapter 5 shows how to approach the practical problem of trying to estimate the likely level of profit to be generated in the next year from a set of possible business opportunities. The book finishes with a short chapter commenting on further techniques and a few other software

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packages. Overall this is a very accessible text aimed at practitioners which provides useful practical guidance on how to go about modelling uncertainty as part of a risk analysis. Only four references are cited, which is a pity, even in a book for practitioners. Discussion of practical issues is sensible and pertinent but is unduly brief in a number of places, perhaps reflecting the fairly specific objectives of the text. At only 140 pages of text, it is priced rather high by the publishers, particularly given the basic nature of much of the contents. However practitioners new to quantitative risk analysis will still find it good value for money. Stephen Ward School of Management University o f Southampton UK

Effective Project Management Through Applied Cost and Schedule Control James A Bent and Kenneth K Humphreys Marcel Dekker 1996 456 pp ISBN 0 8247 9715 9 The authors/editors have approached this book from a basis of extensive experience in the oil and chemical industries, and whilst many of their comments have wider application it is to readers in those industries that the material will be particularly valuable. More specifically it will be of value to senior managers in both client and construction companies who wish to assess the extent to which their own company's performance measures up to best practice in the industry. An American book, based on American experience and practice, it does make some reference to work elsewhere, e.g. the forms of contract used by the Institutions of Civil and Mechanical Engineers, and the Federation Internationale des Ingenieurs----Conseils (FIDIC). Generally data is quoted in American terms, e.g. dollars per square foot, and controlling legislation is based on USA practice. This is not an elementary text dealing with the basic approaches to project management, but rather it assumes such an understanding and then concentrates on a critical review of how effective the methods are, and how they can be improved in practice. An essential aspect of their approach is benchmarking, by which a company's performance in project management is compared with what is

being achieved by others and in this and other industries. In particular the extent to which a company is successful in the adoption and implementation of total quality management (TQM) is examined, and it is shown that there is generally considerable scope for improvement. The authors point out that many of the reasons for failure in this respect relate not to the detailed skills of staff, but to lack of commitment on the part of managers. The authors base their work on a threepronged approach: Program--Technical procedures and methods; People skills--Experience, application and ability (but there is no mention here of training in pro); Culture of project groups--Commitment and co-operation. The establishment of cost and time baselines is discussed in considerable detail, with great emphasis being placed on realistic estimates. There are many very good examples quoted to help explain the text whether this is in terrns of planning and control of time, cost or quality. There are over 200 illustrations, many of them simple and clear; there are however some which are over-complicated and others which are not visually very clear (especially where they have been copied directly from computer printouts). The text is well structured, clearly indexed and is written in a style which is easy to understand. Most of the terms used are consistent with general project management practice but there is little specific reference to other publications, and no bibliography. Overall this will prove to be a useful book in the planning and control work of large construction projects, particularly those in the oil, chemical and other process industries, and as a reference text for students of advanced project management. It should well achieve what the authors have claimed for it. In the absence of a stated price I cannot easily comment on value for money, but I think that on the assumption that the market consists essentially of large construction companies who have a great deal to learn from it, then a price in excess of $100 would seem to be a bargain. For students and other aspiring project managers it might be difficult to justify such a figure. John F Woodward FAPM Consultant Scotland