Quantitative risk analysis (QRA) was the topic of discussion at the December 2013 Singapore Royal Institution of Chartered Surveyors (RICS) seminar. During my experience at Faithful+Gould we have found that typically clients want answers to these questions:
Is the current cost plan or programme achievable?
What is the probability of achieving it?
What is the possible extent of the overrun, if any?
What is a realistic level of contingency provision?
Where are the critical areas?
What are the reasons for their criticality?
What can be done to improve the likelihood of successful delivery?
Pioneered for use on construction projects in the oil and gas industries, QRA provides a structured process for assessing and managing risk. The statistical modelling approach is software based, ranging from semi-quantitative methods that can be applied using simple Microsoft Office based products, to risk models built using specialist software running Monte-Carlo simulations (PDF, 941KB) for schedule and cost analysis purposes.
Pioneered for use on construction projects in the oil and gas industries, QRA provides a structured process for assessing and managing risk.
Success obviously relies on the quality of the information collected. Getting the correct inputs is vital. At Faithful+Gould, we engage with all stakeholders to get this information. We then interrogate and challenge the data to ensure that it’s realistic, unbiased and meaningful. Clients benefit from having the data independently collected to avoid bias.
An experienced risk professional not only knows how to gather the information, but also challenges it...
An experienced risk professional not only knows how to gather the information, but also challenges it, ensuring it is correct and then accurately replicated in the model. Acting on the outputs is also vital – this is about more than analysis. We advise our clients on the range of risks, identify the most serious, and support informed mitigation. This may mean design changes, re-scheduling, or reviewing the cost plan.
QRA supports a project’s governance, providing auditable information. This is a requirement for larger organisations with investors, shareholders and board members to satisfy. Smaller organisations would of course benefit from the same analytical approach to risk management.
QRA supports a project’s governance, providing auditable information.
Faithful+Gould utilises QRA globally, including recent commissions secured by the Singapore-based team in China, Malaysia and India. Here in Singapore, QRA adoption levels are highest in international clients who are already using this approach in the Western markets and want the same best practice, confidence and governance levels for their operations in Asia Pacific. We are also seeing some interest from smaller organisations in Singapore, but the full potential of QRA is still to be realised here.
Through seminars like those held by RICS, Faithful+Gould aims to broaden the industry’s knowledge of the tools available for risk management within a local context. We believe our role is not only to provide services to the industry, but also to improve overall standards and introduce the added value of QRA to a wider client base.
Disclaimer: This article was originally written by Bala Vijayasingam.