Risk Factor Overview

A project can experience impacts to its schedule and costs in the form of a threat, opportunity, or weather event. However, there are risks to a project that could have either a positive or a negative impact. For example, let's say that you are working with a contractor whose team has unpredictable schedule adherence. Sometimes they finish ahead of schedule, and sometimes behind. You can use a risk factor in your project to model this uncertainty. In this case, you might call this risk factor "Productivity". Similarly, you could have fluctuating costs related to a material that has an unstable price. Or, you could simply have a risk factor for duration uncertainty.

Unlike threats or opportunities, risk factors are configured as percentages rather than days or cost amounts. A risk factor with 100% set as its impact means that the risk factor has no effect on that activity, and the duration or cost will not change. When adding a risk factor, you can enter a single percentage or a minimum, most likely, and maximum percentage range. For example, when entering impact details for the risk factor, you can set 90% as a minimum (early or below cost), 100% as most likely (on time or at cost), and 110% maximum (late or above cost) uncertainty.

You can also create a tier system using risk factors. For example, you could have low (+/- 5%), medium (+/- 15%), and high (+/- 30%) material cost uncertainty. Then, you can assign these risk factors based on an activity's attributes, such as more uncertainty for activities occurring further into the future.

Risk factors can be assigned to multiple activities, and a single activity can have more than one risk factor assigned to it. After a risk factor is created, you should assign it to the activities that may be impacted by it. Risk factors that have no assigned activities will not impact the risk analysis.

Use in Risk Analysis

Risk factors are included in the quantitative risk analysis calculations, but are not supported by the qualitative risk analysis. If an activity has uncertainty assigned to it, risk factors are calculated for that activity after that uncertainty has been applied. Risk factor cost impacts have the option to determine which cost type they will impact: Labor, Nonlabor, Materials, or All Costs. Risk factors are applied before threat and opportunities in the risk analysis for both schedule and cost impacts, which means that threat and opportunity sizes are always added based on their size in the risk register and not inflated by a risk factor impact percentage.

If more than one risk factor impacts an activity, the impact is calculated by multiplying the risk factors. For example, risk factor 1 is entered as 110%, and risk factor 2 is 120% for an activity lasting 40 days. The impacted activity duration is 40 days x 110% x 120%, equaling 52.8 days. In the risk analysis, this impact is added to each risk factor proportionally based on their impact. Because this value can be negative, the impact values are absolute.

Risk factors can provide a way to have activity uncertainty that includes correlation. When applying activity uncertainty, you often want to have that uncertainty correlated to reflect underlying causes in the uncertainty in duration. Risk Factors offer an alternate approach, where the underlying cause is entered as a risk factor and by driving multiple activities a correlation can result between those activities. With risk factor percentages, correlation coefficients are calculated during the risk analysis run so that P-80 data is more accurate.

Independent Impact on Activities in a Risk Analysis

Risk Factors typically impact each assigned activity the same the same amount in a risk analysis. For example, a risk factor such as a change in material price affects all activities by the same proportion. However, there is an option to sample the impact of a risk factor independently by activity during a risk analysis. This may be more suitable for a risk factor such as productivity. When this option is selected, the risk factor impacts each of its assigned activities differently.

Let's say you collect historical schedule data on activities performed by civil engineers. Some data points are ahead of schedule, some a little behind, and some very behind. You can create a risk factor called Civil Engineering Slippage, and enter the pre-response minimum, most likely, and maximum values based on your historical data percentages. After assigning its activities, you can choose to sample the risk factor independently for each activity and run the risk analysis. The risk factor impacts each activity with different values, and you can see a model of this historical data to assess what is likely to happen in the current or future project.

You can set this option for a risk factor in the Risk Register main grid by first exposing the Risk Factor Impact Activities Independently Option column, and selecting the checkbox. You can then view the risk factor impact for the activity in the iteration detail panel of the risk analysis, or in the risk iteration analysis.