ValidRisk is the only commercial, cloud-based software to apply parametric modeling of systemic project risk along with the time-tested expected value method for project-specific risks (i.e., risk events)
While fundamental risk skills and knowledge are always required, it minimizes the need for external expertise, and supports consistency (i.e., different analysts should get similar results)
ValidRisk quantifies both cost and schedule risks; it’s output can support joint confidence level (JCL) determinations. Further, used in combination with ValidEsc (in progress), it produces the only “universal” capex risk profile integrating cost and schedule risk with escalation (market) risks
1Parametric model of systemic riskMore...
- Addresses all systemic risks defined by research
- Systemic ratings are asset-specific; includes pre-defined rating matrices for 10 asset types (asset types align with AACE® Estimate Classification recommended practices where applicable).
- User can override/edit the defined systemic risk rating narratives for each asset type
- Users of the Construction Industry Institute Project Definition Rating Index (CII® PDRI) can optionally use that rating in lieu of the tool definition matrices
- Help feature to guide the facilitator in workshop discussions
- Easy to use remotely (simple questionnaire format)
- Supports weighting of systemic risks
- Supports model calibration
- Produces probabilistic cost and schedule distributions without simulation
- Can be used alone for: FEL 1/Class 5, small projects, or as input for CPM methods
2Expected Value model of project-specific risksMore...
- Builds on/integrates with the Parametric model (Monte-Carlo combines outputs) using the time-proven probability times impact approach.
- Quantifies residual “critical” risks with material impact on project economics (procedurally, direct linkage to risk registers is not recommended: see “learn more”
- Addresses risk event dependencies
- Analyzes “reserve” (low probability/high impact) risks separately
- Integrates cost and schedule by focusing on risk “responses”; i.e., team defines what action(s) they will take “if” the risk occurs; the response (i.e., contingency planning) is the scope of the integrated impact estimates.
- Considers cost/schedule trading which encourages business involvement; i.e., the risk response depends on the business objective (e.g., cost or schedule-driven?)
- Quantifies time-driven and non-time-driven cost impacts separately; a burn-rate estimating worksheet is included
- Monte Carlo simulation is built in; uses 3-point impact estimates and for duration and cost with triangular distributions (emphasis is on risk response planning, not Monte-Carlo minutiae)
- Produces probabilistic cost and schedule distributions combining parametric and expected value results. If ValidEsc is used, these distributions are applied in the escalation risk model to produce the universal capex risk profile.
- Produces a risk ranking table; unlike tornado diagrams, it ranks risks in multiple ways. This is used to identify potential reserve risks (apply a second tool run to isolate those).
3Complexity/Tipping Point model for potential non-linear cost risk behaviorMore...
- Provides a qualitative tipping-point measure/rating that warns of the potential for cost blowout (see: learn more) and the need to mitigate contributing risk drivers
- Using the tipping point measure, it quantitively models the potential non-linear (blowout) cost impact for sensitivity analysis and potential reserve funding purposes
- A tool is provided for quantifying the cost distribution of larger projects or programs that have been subdivided for analysis into sub-projects (call up stored analyses and merge using MCS considering dependencies)
- The system stores past analyses in the cloud for later updates and/or for research/calibration purposes
- Linked with ValidDatabase, supports estimate and schedule validation to assess bias (optimistic or otherwise), and to provide risk checklists and go-bys
ValidRisk Technical Features
- No additional software required (i.e., MCS is built-in)
- Highest security standards
- Customizable (selected elements)
- Audit trail: retains analysis
- Export reports to MS Excel
- 24x7 online support
ValidRisk Principles & Concepts
- Risk Quantification Principles
- Integrated Project Risk Quantification
- Systemic Risks / Project-Specific (event) risks
- Estimate Classification
- Project Definition Rating Index
- Parametric modeling and regression-based modeling
- Expected Value with Montecarlo Simulation method
- AACE International ® recommended practices