Simulation of the cost of project risks

Abstract

Management of organizations underwent a deep and fundamental change in recent years. Adaptability onto sudden, short-cyclical changes, higher customer orientation, increased need for innovation and increasing complexity are characteristic requirements in the marketplace. The organizations must manage technical progress, increasingly customized customer requirements and the globalization of the competition in order to remain competitive. They must be in the situation to gain new competences and abilities in order to counteract the fast obsolescence of existing knowledge. Successful management systems must guarantee that the production factor knowledge is managed optimally and converted into tangible competitive advantages. In order to reach these objectives and to cope with this complex and challenging objectives, project management is integrated into the organizations management framework. As organizations accept projects as a suitable management approach to achieve the described requirement, it becomes increasingly more important for these organizations to turn over projects within the defined scope, in the planned time and within the estimated budget. The competence, to carry out projects successfully, is a necessity, in order to be able to compete successfully and represents a crucial competitive factor against the competition. In this respect it is amazing that a great number of projects do not end on time or they even have to be ended premature, many projects exceed the planned costs and some don't deliver the expected results. One of the more prevailing reasons for unsuccessful projects is the ignorance of risks associated with projects. Either these risks are never detected or insufficiently managed. The effects of risks during the realization of projects are sufficiently known to industry professionals from experience. In spite of that, practical, quantitative approaches for risk measurement are not as readily available as one might think. This thesis is a draft of a quantitative procedure to the measurement and description of the risk potential in a project.<br />