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Monte Carlo Schedule Risk Analysis. Part 4: The Portfolio Effect

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Published on Dec 20, 2013

The video demonstrates Portfolio Effect using RiskyProject project risk management and risk analysis software.

One often overlooked phenomena in project schedule analysis is the how the Portfolio Effect is expressed when you have a network or right-skewed distributions. Normally, the statistical distributions used to model schedule activities are right-skewed. This is because while we can improve somewhat on the most likely duration estimate if everything goes well, the duration can increase far more, theoretically a task could take an infinite amount of time if everything goes terribly wrong. This create a right skewed distribution with a characteristically long tail to the right. When you perform a Monte Carlo simulation on a series of uncertain elements the outcome range of the resultant distribution tightens around the sum of the means. In right-skewed distributions, the mean is higher than the P50, therefore the results of the sum of the project activities move to the right and therefore are more likely to take longer.
In this video, we create a simple schedule of 10 activities with typical schedule durations and show how the Portfolio Effect will move the most likely finish significantly later. If this is not accounted for in the estimate, your forecasted project finish date will be much more difficult to meet.


For more information about RiskyProject software please visit http://www.intaver.com.

About Intaver Institute.
Intaver Institute Inc. develops project risk management and project risk analysis software. Intaver's flagship product is RiskyProject: project risk management software. RiskyProject integrates with Microsoft Project, Oracle Primavera, other project management software or can run standalone. RiskyProject comes in three configurations: RiskyProject Lite, RiskyProject Professional, and RiskyProject Enterprise.

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