top of page

Case Review: Making sure we have enough management reserves

 

"Not all things that count can be counted and not all things that can be counted count"
- Albert Einstein

 

This quote illustrates the importance of Risk Assessment, and acknowledges the need for deeper insights beyond just numbers. We seek to understand our clients organizations, their industries, competitors and objectives. We believe in the value of analysis to support decision-making, however we also understand that the numbers may not tell the whole story. 

 

Case Review: We developed a method to quantify the benefit of risk identification

Problem: A firm realized that it had recurring issues with inadequate project contingency and management reserve funds to address risk occurrence. Although the reserve funds were determined based on risk assessments, it appeared that the assessments were optimistic and hence resulted in inadequate funds.

Approach: We developed a method to quantitatively measure the level of bias that occurred on historical assessments and developed a correction factor. This correction factor was used to adjust estimates in future risk assessments. The figure shows a comparison analysis between estimated probabilities in risk assessments and actual probabilities based on frequency of occurrence.

ActualAndEstimatedProbability.jpg
bottom of page