Risk Quantification using Riscor Model
Riscor® Simulation Model was designed and developed by construction project management professionals for project Owners, EPC Firms and General Contractors to suffice their their capital investment projects needs and contractual undertakings of major construction projects. The QRA process offers client an opportunity, prior to contractually committing to a capital project, of an investigative look at project schedule and cost estimate's risk profile, allowing adequate contingency funding and time to be considered for FID (final investment decision), AFE (approval for expenditure) Sanction or Competitive but Profitable bidding / tendering.
Determining estimate contingencies for capital projects is an art and the science; it is a professional act practiced by experienced and competent Quantitative Risk Specialist with tools. With the knowledge of Quantified Risks, a Project Manager can make much wiser decisions based on “calculated risks”, not guesswork anymore.
“Success" in project management is typically defined as projects being delivered on budget, time, and benefits. “A project is considered a failure when it has not delivered what was required, in line with expectations. Therefore, in order to succeed, a project must deliver to cost, to quality, and on time; and it must deliver the benefits presented in the business case”.
If an original cost estimate is questionable and deceptive, the estimated Total Installed Cost (TIC) won’t be reliable regardless how rigorous the quantitative risk analysis process is for the contingency.
For QRA process of conducting a sophisticated cost estimate risk analysis, the following key steps must be followed, including setting up a reliable simulation model in advance.
- Review Schedule & Estimate and Set up Risk Breakdown Structure (RBS)
- Facilitate and perform Schedule Risk Analysis (Level 2 or 3 schedule)
- Identify the critical “Specific Risks” from cost estimate elements per RBS
- Facilitate Brainstorming Workshop to estimate Risk Ranges (P10 & P90)
- Facilitate Brainstorming Session to identify and estimate “Systemic Risks”
- Populate projected Cash-flow & apply annual risked escalation rates
- Integrate all risky elements in the Riscor Model (@RISK) and run simulation
- Interpret the results and compare to Benchmarks then produce final report
Monte Carlo Simulation
Riscor® Model
For Cost Estimate Contingency and Forecast-at-Completion
- Monte Carlo Simulation (MCS) is to forecast the future cost behavior with very little historical data or benchmark information being known to the decision-makers. Riscor® scientifically does it to derive your cost estimate contingency!
- MCS is one of forecasting techniques to predict project's final cost amount and schedule date using the combination of art (subjectivity) and science (statistics). Riscor® captures all project changes and re-evaluates the adequacy of your contingency!
- Forecast-at-Completion (FAC) is an important task for Project Controls. Traditional "Trending" and EVM methods have flaws of leaving risks out. Riscor® uses multivariate linear regression technique to capture various changes to derive a stochastic FAC!
- Simulation process is a combination of quantitative and qualitative analyses and this approach integrates expert judgement and statistical reasoning. Riscor® captures heuristics and systemic risks in register!
- Monte Carlo simulation method is not purely objective based, rather, the subjectivity, experiences, knowledge & human bias all play key roles in its results. Riscor® normalizes SMEs' inputs for risk ranging!
- Monte Carlo Method is a mathematical technique, which is used to estimate the possible outcomes of a string of uncertain or risky events. Riscor® runs on commercial simulation platform for your project!
Riskcore Stories for QRA
1
Palisade @RISK Pipeline
Palisade (2018): Kinder Morgan uses @RISK for Cost Estimate Risk Analysis of Trans-Mountain Pipeline Expansion Project.
"Using his own risk model build on the @RISK platform, John Zhao of Kinder Morgan (Riskcore Ltd.) combined the
qualitative and quantitative processes to produce an auditable analysis."
2
Risk Review for LRT Project
City of Calgary (2023): Green Line has invested significantly in external due diligence across the full scope of the program.
"For Risk identification, assessments, estimation and monitoring procedures, reviewers included Blakes, City Auditor, Government of Alberta, Hatch, KPMG, Riskcore Ltd., Systech, SMA, WMG."
3
Gold-Mine Project QRA
Equinox (2022): Greenstone Gold Project is pleased to provide an update on construction progress and results of independent QRA.
"Valency Inc. (via Riskcore Ltd.) recently completed a thorough quantitative risk assessment (“QRA”) of the Greenstone Gold Mine Project schedule, material quantities and cost forecast."