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PRJM 6003 Project Risk Management

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PRJM 6003 Project Risk Management

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PRJM 6003 Project Risk Management

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Course Code: PRJM6003
University: Curtin University is not sponsored or endorsed by this college or university

Country: Australia

Brief explain your 2 risk events (one short paragraph each risk – briefly explaining what the risk event is. Do not discuss: causes; probability or consequences; or treatments ) (Note: you must chose/explain risk events that if they eventuate they will increase the sponsor’s budget)d) Recommendation for Contingency (explaining reasons) e) Sensitivity Analysis – based on the Tornado Chart, explain to the Sponsor how you will control and minimise thefollowing :
I. Most sensitive cost variable II. Most sensitive risk event f) Compare and comment on the your cost results against the organisational policy that states “it is expected that theBaseline Budget should have an 80% probability of being with a range of -5/+10%,” 

The budget report is the process of estimating the cost. This report will estimate the cost using the various methodologies. The calculations, graph, and tabulations will be estimated using the methodologies for analyzing the budget in different scenarios. The baseline budget is one of the methodologies and it will be calculated and estimated in this report. The Monte Carlo simulation and tornado charts are used to representing the budget report in the form of graphical representation also will be done according to the specification.
The budget is calculated and estimated uses different methodologies for the given construction work will be generated using the methodologies. The budget report produced to the sponsor of the project who planned to build the the report will be produced. The main theme of the project is to build the budget report for the construction works. Using the budget report analyst can find what are the major risks and which are all the different risks are generated. Using that report those risks will be avoided once the project is executed.
Recommended Baseline Budget
Baseline budget is an accounting concept. A baseline budget is used for estimating the project cost. And also used for comparing the performance of the project. Re-baseline means some significant changes are applicable in scope 1(Davidovi? et al. 2014). A baseline budget is used for breaking all the excepted cost of the project. Most of the proper management project includes a baseline budget 2(Aven 2018). It contains only the individual items.
There two different categories are used in the baseline budget such as materials and labor. A baseline budget is fully based on the time-phased plan. It includes several resources such as direct cost, indirect cost, possible contingencies, and excepted profile. The direct cost contains material, labor, and equipment 3(BALOGH 2009). Next one is the indirect cost it contains office space, and staffs are not directly involved in the project. For instance costs for telephones, stationery, postage, travel, taxes, and fees.[1]
Baseline budget is the method for listing the cost elements and used for monitoring so it helps to moves the project to the forward step. Baseline budgets are used to determine the over the budget or under [2][3]the budget 4(Ezez. 2017). The budgets are split into various categories if the categories are over and under the budget. The below graph represents the baseline budget for the construction work. [4]
The baseline budget estimated previously is 700000 and the actual budget for the baseline budget after the calculation is 1000000. 
Variables for baseline budget:
Variables for baseline budgets are divided into three phases. They are create draft of architecture, construction phase and decoration phase.
Cost estimation and its representation:onte Carlo simulation Technique
                  This technique is used in the way of mathematical concepts. It is used to analyze the risk in the decision making. It is mainly used for the project management, research, and development. This method is used to analyze the risks through the process of stimulation. And it also analyzes the output delivery of the risk by using the scenarios. It had three types. They are the best case, worst case, and most likely estimates.
Analysis of Monte Carlo method
The analysis is used to get the risk variables. And also it is used to find the variable range and limits. Through this analysis the connection to be established for the correlated variables. It is used to gather the final output by the usage of the running of simulation 5(Ezez. 2017). [5]
Resource allocation
            Resource allocation means the project manager can collect and investigate the available pieces of information. It includes human resources, equipment resources, and material resources. Once the investigation of the resources is completed successfully then it automatically creates a cost estimation. The available resources contain the following components 6(Leobacher 2006). Such as starting balance, categorical funding, one time funds. First, we need to compare the baseline budget and available resources. Suppose the available resources are greater than the baseline budget then move on to adjustments required to budget 7(Percoco 2012). At the same time, a baseline budget is greater than available resources then move on to the same one.
Time-phased budget
            The time management is one of the most important resources in the baseline budget. It is used for calculating the actual result for the project. And also provide some additional values. It can be used in the creation of performance measurable baseline 8(Ezez. 2017). This kind of baselines is achieved several things like plan, track, and report. Sometimes it refers to the cost management applications. And also it represents multiple activities at the same time.

The EVM metrics are calculated by time-phased budget. EVM stands for earned value management. It provides the details about the performance of the project, cost, status, and schedule.
It contains some special functional requirements. Then also projected the money flow for the project.
The price lateral of the business value announcement is provided by the time-phased budget.
It can be used for explaining the details about committed spending versus actual payment, spending limits, and approvals.
The reverse funds are fully based on the risk plan. [6]
Recommendation for Contingency

Unique spending plan did not perceive the potential for value changes in the market from the time the financial backing was finished Deficient venture data accessible when the monetary allowance was produced. The stipend ought to be the correct size, lined up with the advancement cost display and ought to abstain from copying dangers as of now represented in the outline and development possibilities 9(Kashyap, Heena. 2016). One of the primary dangers for proprietors is program change, so this could frame the fundamental piece of the proprietor’s possibility. Once the proprietor decides the possibilities, the subsequent stage is to oversee them suitably.
Sensitivity Analysis    
Sensitivity analysis is a kind of function that is used in the worksheet cells. It is the one of the model which is used for analyzing the risks. The risks are later solved by risk solver using Monte Carlo simulation. It is also used to examine the net profit, charts, graphs and statistics.
Risk events
Risk 1: the number of days increased to 20 days than the estimated date. Then the budget amount also increased. The amount increased 143500 than the actual amount.
Risk 2: the employee inactive is the next risk in the sensitivity analysis. Because there are only a few employees working in the actual and it is lesser than the estimated.
From the above the sensitivity analysis for the tornado chart the most sensitivity variables are series 1 and series 2.
Tornado diagram in sensitive analysis
            The tornado diagrams are also known as tornado plots or tornado charts. It is a kind of chart which has different techniques. The largest bars are located in the above of the histogram, the next largest bar is located at the second from the top. The tornado diagrams are mostly used for determining the sensitivity analysis 10(Velez-Pareja 2008). We know that a tornado chart is a type of sensitivity analysis.

It is used for representing the degree in a graphical manner. It allows only the specific independent values because it contains some sensitive results 11(HEARNE 2010). Just click the tornado chart button in the sensitive analysis dialogue box then it automatically creates the tornado chart. It runs the series of deterministic simulations. It allows only one independent variable at a time 12(Sullivan et al. 2014). And also this chart contains three different values such as lower bound, central value, and upper bound. All the independent variables are completed then the process will be completed.

This chart explains baseline budget using the tornado chart. The representation of tornado chart is based on the series. There are two different series are used to differentiate the variables in the tornado chart. Series 1 represents expected estimation and series 2 represents actual estimation 13(kutlu, levent & Wang, Ran. 2015). For understanding the sensitivity analysis tornado graphs are used. It is one of the easiest way to understand the sensitivity analysis. For generating the tornado graph 14(Starr 2001). It must right click on the on the output to generate tornado chart. The x axis characterizes the production value and y axis characterizes the input variables. The positive impact shown in the right side of the tornado graph and negative impact shown in the left side of the tornado graph 15(Rozell 2018). The estimated budget for the construction work is 1200000 but the actual budget after the estimation is 1343000.
Comparison baseline versus recommended
Each of the three gatherings – proprietor, creator and temporary worker – may see the possibility in an unexpected way, causing administration concerns 16(Tsanakas, Andreas & Millossovich, Pietro. 2015). Possibility reserves are to be utilized fundamentally to finish the degree or to manage obscure conditions not for [11]including extension. The engineer and creators ought to guarantee records are as entire as would be prudent, as the possibility isn’t proposed to address late plan choices.

Aven, Terje. 2018. “Reflections on the Use of Conceptual Research in Risk Analysis”. Risk Analysis. Wiley. doi:10.1111/risa.13139.
Ballotta, Laura & Kyriakou, Ioannis. 2014. “Monte Carlo Simulation of the CGMY Process and Option Pricing”. Journal of Futures Markets34 (12): 1095-1121. Wiley. doi:10.1002/fut.21647.
BALOGH, T. 2009. “THE BUDGET: B. THE BUDGET PROPOSALS AND TECHNICAL PROGRESS”. Bulletin of the Oxford University Institute of Economics & Statistics6 (7): 104-107. Wiley. doi:10.1111/j.1468-0084.1944.mp6007002.x.
Davidovi?, Branko; Leti?, Duško & Jovanovi?, Aleksandar. 2014. “MONTE CARLO SIMULATION IN INTRALOGISTICS”. MEST Journal2 (1): 87-93. MESTE NGO. doi:10.12709/mest.
2017. “Budget-Saving Advice”. The Major Gifts Report19 (9): 7-7. Wiley. doi:10.1002/mgr.30775.
2017. “Factors Affecting Construction Cost Estimation of Building projects”. International Journal of Recent Trends in Engineering and Research3 (4): 379-387. International Journal of Recent Trends in Engineering and Research. doi:10.23883/ijrter.2017.3161.rrkha.
2017. “Promote Events on a Limited Budget With Volunteers’ Help”. Special Events Galore17 (4): 8-8. Wiley. doi:10.1002/speg.30561.
HEARNE, JOHN W. 2010. “AN AUTOMATED METHOD FOR EXTENDING SENSITIVITY ANALYSIS TO MODEL FUNCTIONS”. Natural Resource Modeling23 (2): 107-120. Wiley. doi:10.1111/j.1939-7445.2009.00058.x.
Hope, Joan. 2016. “Address budget shortfalls with technology, creativity, grant funding”. Campus Security Report13 (1): 3-3. Wiley. doi:10.1002/casr.30154.
Kashyap, Heena. 2016. “Risk Analysis and Estimation of Schedule Using Monte Carlo Simulation”. International Journal Of Engineering And Computer Science. Valley International. doi:10.18535/ijecs/v5i9.42.
kutlu, levent & Wang, Ran. 2015. “Estimation of Cost Efficiency Without Cost Data”. SSRN Electronic Journal. Elsevier BV. doi:10.2139/ssrn.2607280.
Leobacher, G. 2006. “Stratified sampling and quasi-Monte Carlo simulation of Lévy processes”. Monte Carlo Methods and Applications12 (3): 231-238. Walter de Gruyter GmbH. doi:10.1163/156939606778705155.
Percoco, Marco. 2012. “On the Sensitivity Analysis of the IIM: A Rejoinder”. Risk Analysis32 (1): 7-8. Wiley. doi:10.1111/j.1539-6924.2011.01753.x.
Rozell, Daniel J. 2018. “The Ethical Foundations of Risk Analysis”. Risk Analysis. Wiley. doi:10.1111/risa.12971.
Starr, Chauncey. 2001. “Hypothetical Fears and Quantitative Risk Analysis”. Risk Analysis21 (5): 803-803. Wiley. doi:10.1111/0272-4332.215152.
Sullivan, Sean D. et al. 2014. “Budget Impact Analysis—Principles of Good Practice: Report of the ISPOR 2012 Budget Impact Analysis Good Practice II Task Force”. Value in Health17 (1): 5-14. Elsevier BV. doi:10.1016/j.jval.2013.08.2291.
Tsanakas, Andreas & Millossovich, Pietro. 2015. “Sensitivity Analysis Using Risk Measures”. Risk Analysis36 (1): 30-48. Wiley. doi:10.1111/risa.12434.
Velez-Pareja, Ignacio. 2008. “Monte Carlo Simulation (Simulación De Monte Carlo) (Slides in Spanish)”. SSRN Electronic Journal. Elsevier BV. doi:10.2139/ssrn.1131545.

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