To be credible, the Integrated Master Schedule (IMS) must be risk tolerant. Here's how to build that IMS.

1. 1
BUILDING A RISK
TOLERANT IMS
Using Earned Value to manage the risk of a project in
terms “risk adjusted physical performance”

2. Our Real Motivation is to Increase the
Probability of Program Success PoPS
2

3. Risk Management is about Probability
3

4. Statistics v. Probability
4
 In building our risk tolerant
IMS, we’re interested in the
probability of a successful
outcome
 “What is the probability of on
or before planned completion
date?”
 The underlying statistics of
the cost, schedule and
technical performance
influence this probability.
 The statistics of the task durations, their arrangement in a
network of tasks and correlation define how this probability
based estimated developed.

5. Our DoD Risk Management Process
5
Correct any Anticipate
deviations what can
go wrong
Control
Identify
Track all Communicate
actions Track
Analyze Decide
what is
important
Plan
Plan to take action

6. Control
Identify Risks
Identify
Communicate
Track
Analyze
Plan
6
 Risk identification answers the question “What can
go wrong?” by:
 Looking at current and proposed staffing, process,
technical, supplier, operational, resources, and any
other dependencies,
 Monitoring technical results especially failures,
 Reviewing potential shortfalls against expectations,
 Analyzing negative trends.

7. Control
Analyze Risks
Identify
Communicate
Track
Analyze
Plan
7
 Risk analysis answers the question “How big is the
risk?” by:
 Considering the likelihood of the root cause occurrence;
 Identifying the possible consequences in terms of
performance, schedule, and cost; and
 Identifying the risk level using the “Risk Reporting
Matrix”

8. Control
Planning the Risk Response
Identify
Communicate
Track
Analyze
Plan
8
 Risk mitigation planning answers the question “What
is the program approach for addressing this
potential unfavorable consequence?” One or more
of these mitigation options may apply:
 Avoiding risk by eliminating the root cause and/or the
consequence,
 Controlling the cause or consequence,
 Transferring the risk, and/or
 Assuming the level of risk and continuing on the current
program plan.

9. Control
Implementing the Risk Pln
Identify
Communicate
Track
Analyze
Plan
9
 Risk mitigation (plan) execution ensures successful risk
mitigation occurs. It answers the question “How can the
planned risk mitigation be implemented?” By:
 Determining what planning, budget, and requirements and
contractual changes are needed,
 Providing a coordination vehicle for management and other
stakeholders,
 Directing the teams to execute the defined and approved
risk mitigation plans,
 Outlining the risk reporting requirements for on-going
monitoring, and
 Documenting the change history.

10. Control
Tracking the Risk
Identify
Communicate
Track
Analyze
Plan
10
 Risk tracking ensures successful risk mitigation. It
answers the question “How are things going?” by:
 Communicating risks to all affected stakeholders,
 Monitoring risk mitigation plans,
 Reviewing regular status updates,
 Displaying risk management dynamics by tracking risk
status within the Risk Reporting Matrix, and
 Alerting management as to when risk mitigation plans
should be implemented or adjusted.

11. Control
Risk Control Processes
Identify
Communicate
Track
Analyze
Plan
11
 The control function takes the tracking status reports
for the watched and mitigated program risk and
decides what to do with them based on the
reported data. The general process of controlling
risks includes:
 Analyzing the status reports
 Deciding how to proceed
 Executing the decisions

12. Putting this framework together with EV
12
Program
Manager Top N
risks decision
Control
s
assign responsibility
Functional • Integrate
Managers • Reprioritize
Top N • Authorize
• Functional area
risks
resources
Work Package Analyze Plan
Managers  Review • Approve plans 2
assign non-top N
 Prioritize • Recommend EV Data
 Evaluate actions
 Classify • Develop plans
Individuals/
Team Members
risks risk
status 3
1 EV Data Identify Track EV Data
trends

13. Connecting EV and Risk Management
13
1
 EV data is assigned to Tasks and Work Packages,
managed by CAMs and WP managers.
 They can review, prioritize, evaluate, classify the risks
they know well at the lowest level in the IMS.

2 In the planning stages of the IMS (or BoE), risks are
revealed during the normal course of work
 Identifying
and analyzing these risks, again falls on the
CAM and WP Managers.

3 During the Tracking activities, risks are including the
in standard EVM performance assessment
 ETC, EAC, BCWR, and other going forward estimiates

14. 14 Step by Step Data and Process

15. Identification Activities Overview
15
PRINCIPLES
Statement of risk
1. Non-judgmental
2. Individual voice Context
Individual 3. Multiple perspectives
uncertainties
List of risks
Group/team
uncertainties
Project EV Data
data

16. Analysis Activities Overview
16
PRINCIPLES
Statement 1. Most important Statement
of risk 2. Vital few of risk
3. Leverage relationships Probability
Context Impact
Timeframe
Classification
Rank Classification
Class 1 Class 2
Risk Risk
Risk Risk
Risk Class 3
Risk Risk
List of risks Master list
of risks
Top
N

17. Planning Activities Overview
17
Statement of risk
Context Resources Project goals Statement of risk
Impact and constraints Context
Probability Impact
Timeframe Probability
Classification Timeframe
Rank Classification
Rank
Plan Approach
Master list Classification
of risks
Class 1 Class 2
Top Risk Risk
N
Risk Risk PRINCIPLES Action plans
Risk Class 3 1. Action-oriented
Risk Risk 2. Ownership
3. Accountability

18. Tracking Activities Overview
18
PRINCIPLES
1. Risk-driven measures
Statement of risk 2. Know your audience
Context
Impact 3. Know what success looks like
Probability
Timeframe
Classification Status reports
Rank
Plan Approach Resources • risks
• mitigation
plans
Action plans
Statement of risk
Context
Impact
Probability
Timeframe
Classification
Risk & mitigation Rank
plan measure Plan Approach
Project Status
data

19. Control Activities Overview
19
PRINCIPLES
1. Follow the plan Decisions
2. Conditions change • replan
• close
Status reports • invoke
contingency
• risks • continue
• mitigation tracking
plans
Statement of risk Statement of risk
Context Context
Impact Impact
Probability Probability
Timeframe Timeframe
Classification Classification
Rank Project Rank
Plan Approach Plan Approach
Status data Status
Control Decision

20. Management Reserve
20
 Calculate total project management reserve required
based on
 statistical modeling
 past experience Total Funds
4000
3500 Management Reserve
BAC
3000
2500 Schedule
Reserve
BCWS
2000
1500
1000
500
0
Jan Mar May Jul Sep Nov Jan Mar May

21. Management Reserve Strategy
21
1200
1000
800
600 Estimate based on
risk evaluation Estimate based on
baseline straight-line
400
200
0
Jan Mar May Jul Sep Nov Jan Mar May

22. Risk Metrics connected the IMS
22
12
10 PROBLEM DOMAIN
MITIGATION
8 DOMAIN
RISK*
Pessimistic
6 Transition Thresholds
Expected
4 Optimistic
WATCH DOMAIN Accept
2 Event #1 2 3 4 5 6
Feb 96 Mar 96 Apr 96 May 96
Time

23. Risk–Earned Value
23
6000
5000
Risk Exposure $$$
4000
REWS: Risk Exposure Work Scheduled
3000
2000
1000
0
Feb Mar Apr May Jun

24. Risk Retirement Plan in the IMS
24
25000 Time Now
20000
Risk Exposure Variance Schedule Risk Variance
15000
Actual to-date
Estimate To Completion
10000
Plan To Completion
5000
0
Jan Mar May Jul Sep Nov Jan Mar May

25. Schedule and Funding Reserve
25
Total Funds Negotiated
4500
Management
4000
Reserve
3500
BAC
3000
2500
2000 BCWS
1500
1000
500 Schedule
Reserve
0
Jan Mar May Jul Sep Nov Jan Mar May
TIME

26. Schedule and Funding Reserve
26
Now negotiated
Total Funds
4500
4000 Management Reserve Cost
3500 overrun EAC
BAC
3000
2500
2000 BCWS Schedule
1500 slip
1000
500 Schedule
ACWP BCWP Reserve
0
Jan Mar May Jul Sep Nov Jan Mar May
TIME

27. Management Reserve Ratio (MMR)
27
1.4
MR TFA BAC 1.3
MRR  TFA  TFA CPI
EAC BAC 1.2
Ratio of total funds available against MRR
1.1
total estimated funds expended at CPI
completion 1
MRR: Management Reserve Ratio 0.9
TFA: Total Funds Available
0.8

28. Risk Data Analysis Relationships
28
Term Symbol Formula Checklist Actions
Ratio of work accomplished against
Risk Exposure ARWP
REPI money spent (Efficiency Rating:
Performance Index REWP
Work Done for Resources Expended)
Ratio of work accomplished against what
Risk Schedule RSPI REWS should have been done (Efficiency Rating:
Performance Index REWP Work done as compared to what should
have been done)
TFA Ratio of total funds available against
= EAC total estimated funds expended at
Management MRR
Reserve Ratio completion or total funds available
TFA against the budgeted cost at completion
= X CPI multiplied by the cost performance index
BAC

29. Risk Exposure Tracking
29
25000 Time Now
20000
Risk Exposure Variance Risk Schedule Variance
15000
Actual to-date
Estimate To Completion
10000
Plan To Completion
5000
0
Jan Mar May Jul Sep Nov Jan Mar May
1.4
1.3
MRR
1.2
1.1
Good
1 CPI
0.9
Not so Good
0.8

30. Reference Class Calibration
30
 Estimating in the
presence of
uncertainty
 Past performance
used to calibrate
future estimates
 Time phased
improvements in
upper and lower
bounds

31. Reference Class Step By Step
From Nobel Prize to Project Management, Flyvbjerg, 2006
31

32. Flyvbjerg’s 4–step Approach
32
1) Form the reference class, a collection of similar-to projects for which there
is both history and reasonable insight to the history so that adjustments for
present time can be made.
2) Develop a true distribution of the reference class, and from that
distribution calculate the cumulative probability.
 This probability curve, developed from reference class, the outside view.
3) Develop the inside view.
 The inside view is a traditional estimate by the project team.
4) Adjust the inside view based on the probability of historical outcome from
the outside view.
 Develop a forecast using the reference class probability confidence curve.
 Pick a confidence limit, and then adjust the inside view to have a corresponding
confidence.

33. Integrating the Cost, Schedule and Technical Risk
Model for DI-MGMT-81650 Compliance
33
Cost, Schedule, Technical Model†  Research the Project
 Find Analogies
 Ask Endless Questions
WBS
 Analyze the Results
Probability
Density  What can go wrong?
Task 100 Function  How likely is it to go wrong?
 What is the cause?
Task 101  What is the consequence?
Task 102
Task 103 Monte Carlo Simulation
Tool is Mandatory
Task 104
Cumulative Distribution Function
1.0
Task 105 .8
.6
Task 106 .4
.2
0
Days, Facilities, Parts, People

34. Summary
34
 Earned Value methods used
 to indicate risks
 plan allocation of management reserve
 track risk exposure “buydown”
 track “buydown” investment
 Use for “critical” risks
 Account for actions that reduce risk
 Fixing risks is cheaper than fixing problems

35. 35 Performance Based Management(sm), Copyright ® Glen B. Alleman, 2012

36. Program Risk Management Process Flow