Risk and Decision Analysis in Projects
Is there anything more important to the success of a project than making good decisions? This skill is certainly at or near the top of the list. Yet, few of us have had formal training in decision making. Decision analysis is the discipline that helps people choose wisely under conditions of uncertainty. This book introduces risk and decision analysis applied to project management. Probability is the language of uncertainty. Fortunately, a few basic concepts in probability and statistics go a...
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Is there anything more important to the success of a project than making good decisions? This skill is certainly at or near the top of the list. Yet, few of us have had formal training in decision making. Decision analysis is the discipline that helps people choose wisely under conditions of uncertainty. This book introduces risk and decision analysis applied to project management. Probability is the language of uncertainty. Fortunately, a few basic concepts in probability and statistics go a long way toward making better decisions.The evaluation calculations are straightforward, and many everyday problems can be solved with a handheld calculator. Schuyler also explains and demystifies key concepts and techniques, including expected value, optimal decision policy, decision trees, the value of information, Monte Carlo simulation, probabilistic techniques, modeling techniques, judgments and biases, utility and multi-criteria decisions, and stochastic variance. Some of Schuyler's tried-and-true tips include: The single-point estimate is almost always wrong, so that it is always better to express judgments as ranges. A probability distribution completely expresses someone's judgment about the likelihood of values within the range. We often need a single-value cost or other assessment, and the expected value (mean) of the distribution is the only unbiased predictor. Expected value is the probability-weighted average, and this statistical idea is the cornerstone of decision analysis. Some decisions are easy, perhaps aided by quick decision tree calculations on the back of an envelope. Decision dilemmas typically involve risky outcomes, many factors, and the best alternatives having comparable value. We only need analysis sufficient to confidently identify the best alternative. As soon as you know what to do, stop the analysis! Be alert to ways to beneficially change project risks. We can often eliminate, avoid, transfer, or mitigate threats in some way. Get to know the people who make their living helping managers sidestep risk. They include insurance agents, partners, turnkey contractors, accountants, trainers, and safety personnel. John Schuyler established Decision Precision in 1988 to train and assist clients in project risk management, project and corporate economic modeling, and decision policy. He holds BS and MS degrees in mineral engineering physics from the Colorado School of Mines and an MBA from the University of Colorado at Boulder. Fred M. Seidell III - Cost Engineering Magazine This text is thoroughly complete in the technical approaches, tools, and practices available to manage risk and make informed, thoroughly considered decisions. This text is recommended for every project professional's library.
\ Bob FeldmanGood decision-making is obviously top priority, but few of us have had significant formal training in the process and many tend to take an intuitive swipe at the data, trust our gut, and call the shot. Schuyler attempts to correct this situation by laying out a formalized, statistical based, decision analysis methodology...and he does a pretty good job. The coordinated demonstration models are very helpful in seeing the effectiveness of these tools. Schuyler's text pulled it all together and glued the concepts in my mind.\ —PMI LOS ANGELES chapter newsletter, Aug. 2003\ \ \ \ \ CIO MagazineComprehensive overview of several types of methodologies including Monte Carlo simulation and decision tree analysis. Technical but accessible, it's more focused on concept, less focused on practice than Savage's book.\ —July 1, 2003\ \ \ Cost Engineering MagazineThis text is thoroughly complete in the technical approaches, tools, and practices available to manage risk and make informed, thoroughly considered decisions. This text is recommended for every project professional's library.\ — Fred M. Seidell III\ \ \ \ \ BooknewsSchuyler has over 25 years of experience in economic evaluation, training, and management. Here he presents a text on decision analysis (DA), the discipline which aids decision makers in making sound choices under conditions of uncertainty. Coverage includes an overview of the concept of decision analysis; how DA applies to project risk management; a general problem-solving process; details about project modeling; the use of probability distributions for uncertain inputs; some emerging techniques including critical chain project management, optimization, and expert systems; and a brief tutorial about probability rules. The text is based on articles contributed by the author to the magazine, , from 1992 through 2000. Written for project managers. Annotation c. Book News, Inc., Portland, OR (booknews.com)\ \
