Cost Risk Analysis

What is Cost Risk Analysis?

Our Cost Risk Analysis Services

• Traditional cost risk analysis

  
  works by allocating each cost line item of the project estimate a three-point estimate of potential outcomes (optimistic, likely, pessimistic).
  
  These cost ranges are then combined with risk events, and the project is simulated many thousands of times.
  
  In each simulation, values are randomly selected within each item’s three-point distribution and the total cost outcome measured across the entire project.

• Cost analysis including risk factors

  
  has all the benefits and processes of the traditional cost range uncertainty analysis, but provides additional functionality to the model by also identifying those uncertainties that would have common influence across many cost items (variation in average labour rate or the cost of steel, for example).
  
  Use of risk factors in cost risk analyses facilitates deeper visibility and understanding of model outcomes and behaviours and typically fosters greater acceptance of the risk analysis process.

• Integrated Cost & Schedule Risk Analysis (IRA)

  
  is our premium form of cost risk analysis.
  
  In this approach we take all the benefits of cost analysis including risk factors, and combine them with the added integrity of inclusion of a project schedule model.
  
  In other forms of cost risk analysis, analysts are forced to make assumptions regarding the potential impact of schedule on project costs.
  
  However, in IRA the costs are allocated to the areas of the schedule to which they relate, meaning that the time dependent costs behave in accordance with the expected schedule outcomes.
  
  This makes the calculation of cost uncertainties associated with schedule allowances much more accurate, and provides the additional benefit of being able to rank all drivers of cost uncertainty, even if they stem from schedule related sources.