Overview of Conventional Risk Quantification Methods

Deterministic (scoring) and probabilistic (Monte Carlo) risk quantification methodologies are overviewed as related to risk assessment steps of the PRM process. A role of various realizations of bias including zealotry in selection of conventional methods is reviewed. It is shown that deterministic (scoring) methods are irreplaceable when developing risk-addressing actions (the first PRM goal), although they are notoriously inaccurate when developing project contingencies (the second PRM goal). These methods can handle risks of impacts on both quantifiable and unquantifiable project objectives and are effective in selection of project alternatives. The Monte Carlo methods are valuable for development of schedule and cost contingencies only. Various Monte Carlo methodologies may have high systematic errors if they overlook main components of project risk exposure. Activity and line-item ranging methods miss out risk events; cost risk analyses miss out schedule-driven costs; all Monte Carlo methods overlook risk interactions as attributes of complex project systems.