IDEAS home Printed from https://ideas.repec.org/a/pal/jorsoc/v60y2009i4d10.1057_palgrave.jors.2602586.html
   My bibliography  Save this article

A practical method of determining project risk contingency budgets

Author

Listed:
  • D F Cioffi

    (The George Washington University)

  • H Khamooshi

    (The George Washington University)

Abstract

Given a collection of accepted risks with corresponding impacts and probabilities over the life of a project (or a relevant portion), a method to estimate the total potential impact at a given certainty is presented. Project sponsors and managers can decide their risk tolerance and set aside corresponding contingency funds. This analytic method uses a binomial distribution with a probability equal to the risks’ average probability. At a desired statistical confidence level, the number of risks to consider is determined, and risks are ranked in descending order of either impact or expected value of impact. The ranked risks’ impacts are then summed over the specified number of risks, leading to an appropriate contingency budget. The budget found with this method compares extremely well with the one ascertained from numerical simulations of the risk occurrences.

Suggested Citation

  • D F Cioffi & H Khamooshi, 2009. "A practical method of determining project risk contingency budgets," Journal of the Operational Research Society, Palgrave Macmillan;The OR Society, vol. 60(4), pages 565-571, April.
    • Handle: RePEc:pal:jorsoc:v:60:y:2009:i:4:d:10.1057_palgrave.jors.2602586
    DOI: 10.1057/palgrave.jors.2602586
    as

    Download full text from publisher

    File URL: http://link.springer.com/10.1057/palgrave.jors.2602586
    File Function: Abstract
    Download Restriction: Access to full text is restricted to subscribers.
    File URL: https://libkey.io/10.1057/palgrave.jors.2602586?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. T S Glickman & H Khamooshi, 2005. "Using hazard networks to determine risk reduction strategies," Journal of the Operational Research Society, Palgrave Macmillan;The OR Society, vol. 56(11), pages 1265-1272, November.
    2. C Eden & T Williams & F Ackermann & S Howick, 2000. "The role of feedback dynamics in disruption and delay on the nature of disruption and delay (D&D) in major projects," Journal of the Operational Research Society, Palgrave Macmillan;The OR Society, vol. 51(3), pages 291-300, March.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Rao Rao & Xingping Zhang & Zhiping Shi & Kaiyan Luo & Zhongfu Tan & Yifan Feng, 2014. "A Systematical Framework of Schedule Risk Management for Power Grid Engineering Projects’ Sustainable Development," Sustainability, MDPI, vol. 6(10), pages 1-30, October.
    2. Petr Řehoř & Jaroslav Vrchota, 2017. "Influence of Project Approach Implementation on the Occurrence and Perception of Crises in Agricultural Enterprises in the Czech Republic," Acta Universitatis Agriculturae et Silviculturae Mendelianae Brunensis, Mendel University Press, vol. 65(3), pages 1039-1044.
    3. Ji-Myong Kim & Taehui Kim & Kiyoung Son & Sang-Guk Yum & Sungjin Ahn, 2019. "Measuring Vulnerability of Typhoon in Residential Facilities: Focusing on Typhoon Maemi in South Korea," Sustainability, MDPI, vol. 11(10), pages 1-11, May.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. F Ackermann & C Eden & T Williams & S Howick, 2007. "Systemic risk assessment: a case study," Journal of the Operational Research Society, Palgrave Macmillan;The OR Society, vol. 58(1), pages 39-51, January.
    2. Ramin Ansari & Mohammad Khalilzadeh & Roohollah Taherkhani & Jurgita Antucheviciene & Darius Migilinskas & Shohreh Moradi, 2022. "Performance Prediction of Construction Projects Based on the Causes of Claims: A System Dynamics Approach," Sustainability, MDPI, vol. 14(7), pages 1-19, March.
    3. Hossein Kiani & Seyed Hossein Hosseini & Farshid Abdi, 2018. "A Model to Investigate the Effect of Work Ethic Culture on Dynamics of Rework in Management of Projects," Interdisciplinary Description of Complex Systems - scientific journal, Croatian Interdisciplinary Society Provider Homepage: http://indecs.eu, vol. 16(1), pages 40-59.
    4. Bloomfield, Katherine & Williams, Terry & Bovis, Chris & Merali, Yasmin, 2019. "Systemic risk in major public contracts," International Journal of Forecasting, Elsevier, vol. 35(2), pages 667-676.
    5. Guo, Xiaoxue & Ding, Long & Ji, Jie & Cozzani, Valerio, 2022. "A cost-effective optimization model of safety investment allocation for risk reduction of domino effects," Reliability Engineering and System Safety, Elsevier, vol. 225(C).
    6. Luz Stella Cardona-Meza & Gerard Olivar-Tost, 2017. "Modeling and Simulation of Project Management through the PMBOK® Standard Using Complex Networks," Complexity, Hindawi, vol. 2017, pages 1-12, December.
    7. Henao, Felipe & Franco, L. Alberto, 2016. "Unpacking multimethodology: Impacts of a community development intervention," European Journal of Operational Research, Elsevier, vol. 253(3), pages 681-696.
    8. Comi, Alice & Eppler, Martin J., 2014. "Diagnosing capabilities in family firms: An overview of visual research methods and suggestions for future applications," Journal of Family Business Strategy, Elsevier, vol. 5(1), pages 41-51.
    9. Georgiou, Ion, 2012. "Messing about in transformations: Structured systemic planning for systemic solutions to systemic problems," European Journal of Operational Research, Elsevier, vol. 223(2), pages 392-406.
    10. Iyer K. Chandrashekhar & Banerjee Partha S., 2016. "Project ambidexterity: case of recovering schedule delay in a brownfield airport project in India," Organization, Technology and Management in Construction, Sciendo, vol. 8(1), pages 1464-1481, December.
    11. J Davis & A MacDonald & L White, 2010. "Problem-structuring methods and project management: an example of stakeholder involvement using Hierarchical Process Modelling methodology," Journal of the Operational Research Society, Palgrave Macmillan;The OR Society, vol. 61(6), pages 893-904, June.
    12. Nigel Wadeson, 2013. "The Division of Labour under Uncertainty," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 169(2), pages 253-274, June.
    13. G Zhu & J F Bard & G Yu, 2005. "Disruption management for resource-constrained project scheduling," Journal of the Operational Research Society, Palgrave Macmillan;The OR Society, vol. 56(4), pages 365-381, April.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:pal:jorsoc:v:60:y:2009:i:4:d:10.1057_palgrave.jors.2602586. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://www.palgrave-journals.com/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.