Central Indiana Chapter Meeting - August 2020
Christian B. Smart, Ph.D., CCEA, Chief Scientist, Galorath Federal
Solving for Project Risk Management: Understanding the Critical Role of Uncertainty in Project Management
Risk is an important consideration for all projects. However, when projects plan, they tend to look only at the best-case scenario. The overwhelming emphasis on performance, to the exclusion of cost and schedule considerations, pervades project management. Lack of planning for financial risks leads to significant cost and schedule growth. Cost and schedule increases are a common recurring phenomenon for all projects. Average cost growth in development has been a steady 50% and higher for several decades. One in six programs doubles in cost. These unplanned-for risks cause turmoil when they arise, leading to schedule delays. This enduring phenomenon indicates that:
- Projects have significant resource risks
- In general, risk is not effectively measured or managed
Despite its importance, many projects treat risk as if it were just another four-letter word. Risk measurement and management are imperatives. Estimates of cost and schedule that rely on most-likely inputs lead to significant underestimation of the time and effort required to complete projects. Cost and schedule estimates are stochastic in nature, and need consideration from the ground up, not just as an add-on to a point estimate.
Even when projects conduct risk analysis, there are several issues with current practice:
- Risk is underestimated
- Projects are funded to low confidence levels, resulting in added risk at the portfolio level
- Reliance on confidence levels does not consider tail risk
- Organizations do not assess portfolio-level impacts when considering new projects
The good news is that all these issues can be fixed. This presentation discusses these issues, as well as ways to fix them. Risk management is a mature discipline. Including proper risk management in program planning is a low-hanging fruit that is ripe and ready to pick. A little planning is an investment that will pay big dividends by setting you apart from the competition.
This presentation provides an overview of the forthcoming book Solving for Project Risk Management: Understanding the Critical Role of Uncertainty in Project Management, to be published by McGraw-Hill in November 2020, which can be pre-ordered at this link: http://tiny.cc/j7xbpz
About the speaker...
Christian Smart is the Chief Data Scientist with Galorath Federal, a leading international supplier of parametric cost models and data analytics consulting services. He supports NASA and the Department of Defense in the application of analytics for cutting-edge programs, including nuclear propulsion and hypersonic weapon systems. An internationally recognized expert on risk analysis, he is the author of the forthcoming book Solving for Project Risk Management: Understanding the Critical Role of Uncertainty in Project Management.
Dr. Smart’s professional career has focused on parametric cost analysis and cost risk analysis of space flight and weapon system programs and related areas such as machine learning, regression analysis, cost and schedule risk analysis, probabilistic risk assessment, and the project management policies that support best-in-class cost and schedule analysis. He led the development of a quantitative cost risk analysis capability for the NASA/Air Force Cost Model. Dr. Smart participated in the development of a probabilistic risk analysis for the Space Shuttle. He led and edited the publication of a cost estimating handbook for the Missile Defense Agency. Dr. Smart developed a joint cost and schedule quantitate risk analysis for the Ares I launch vehicle and served on the Review of United States Human Space Flight Plans Committee (also known as The Augustine Commission). For this work he was awarded an Exceptional Public Service Medal by NASA in 2010.
Dr. Smart served as the Cost Director for the Missile Defense Agency for several years, leading a team of over 100 estimators. He is a long-time member of, and is certified by, the International Cost Estimating and Analysis (ICEAA). Dr. Smart currently serves as the Vice President for Professional Development for ICEAA. He Smart has written extensively about cost modeling, parametric cost estimating, and cost risk analysis. Dr. Smart has won numerous best paper awards at cost estimating conferences.
Dr. Smart has BS and BA degrees in mathematics and economics from Jacksonville State University, and a PhD in Applied Mathematics from the University of Alabama in Huntsville. He, his wife, and young son reside in Nashville, Tennessee.