Risk Modelling and Analysis for Business and Project Decisions
In principle, risk modelling (for example with simulation techniques) can be used in any situation where a more static model of a situation could exist but may be deemed insufficient for the decision purposes at hand. Risk modelling involves the qualitative identification and prioritisation of key risks, followed by their representation in a quantitative model. Frequent applications include:
- Contingency planning for cost budgets in major projects
- Contingency planning in other business cases, such as sales forecasting
- Risk registers
- Cash flow forecasting
- Project schedule risk and schedule-cost integration
- Decision-making under uncertainty
- Valuation under uncertainty and management flexibility (real options)
- Resource optimisation under uncertainty
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