QUANTITATIVE APPROACH TO RISK ANALYSIS IN

PROJECT ACTIVITY SCHEDULING

BY

ADENIRAN ADEPEJU ABIMBOLA

(147363)

B.Sc CHEMICAL ENGINEERING (LAUTECH)

A PROJECT SUBMITTED IN PARTIAL FULFILLMENT OF THE

REQUIREMENTS FOR THE AWARD OF MASTERS OF SCIENCE
DEGREE (M.Sc) IN INDUSTRIAL AND PRODUCTION
ENGINERING TO THE DEPARTMENT OF INDUSTRIAL AND
PRODUCTION ENGINEERING, FACULTY OF TECHNOLOGY,
UNIVERSITY OF IBADAN, NIGERIA.
 SEPTEMBER,2010
CERTIFICATION
This is to certify that this project work on quantitative approach to risk analysis in project
activity scheduling was carried out by Adeniran Adepeju Abimbola (147363) in partial
fulfillment of the award of Masters of Science (M.Sc) degree in the department of
Industrial and Production engineering, University of Ibadan, Nigeria.

------------------------- ------------------------
SUPERVISOR DATE
Professor O.E Charles-Owaba
MNSE, FNIEM, PhD (Texas Tech)
Dept. of Industrial and Production Engineering
Faculty of Technology,
University of Ibadan

----------------------------- --------------------------
HEAD OF DEPARTMENT DATE
Dr. F.A Oyawale
BSIE (Indusstrial), M.Sc (OR) Western Michigan
PhD (Benin)
C.Eng, MNSE,MNIE
Dept. of Industrial and Production Engineering
Faculty of Technology,
University of Ibadan.

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 DEDICATION

I dedicate this project work to the almighty God and to my newly born baby
‘Oluwanifemi Opaleye’.

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 ACKNOWLEDGEMENT

My sincere gratitude goes to my parents who have been a pillar of support to me in all
ways and to the love of my life, Mr Oluwamuyiwa Opaleye and my brothers, for their
love, support and care throughout the period of this programme.
I am highly indebted to my supervisor, Professor O.E Charles-Owaba, who was not only
a supervisor but a teacher, mentor and a father. He had spared his time not only to
supervise this project work but to impact knowledge academically, morally and even
spiritually. Thanks for all sir, you are indeed someone to emulate.
My appreciation also goes to Engr. Sam Oluwatobi of ADB Structurals Limited Oyo
State Secretariat area, Ibadan and his team for their help throughout the course of the
project work.
Finally, to my fellow colleagues who made the two years journey worthwhile and
interesting. May the almighty God continue to be with us throughout the remaining part
of our life.

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 ABSTRACT
Lately, the focus in project management across industries has been put on project risk and
ways of mitigating these risks, both known and unknown. And yet it seems that project
risks and issues which arise from some of the known or unknown risks are a direct result
of lack of adequate analysis being done, prior to the project moving into the phase where
actual work takes place.
In this study, project risk is defined as the chance or probability that a project plan may
not work as expected due to unfavourable and unforeseen events in project activities.
Consequently, a theoretical basis for quantifying such probabilities and the associated
impact in terms of activity duration overrun was suggested .Applying the principle of
statistical expectation, a procedure for incorporating the impact of risk into project
scheduling was proposed and applied to a real life construction project. Also introduced
is an approach for developing a risk mitigation plan. Based on this, it is feasible to
develop a risk-incorporated project Gantt chart with the more realistic completion date
and it is also feasible to develop a risk mitigation plan containing the list of risky
activities possible causes, the action and the period a project manager can act in order to
reduce or eliminate risky events
Risk will not be a problem to quantify and mitigate if all team members participate in the
analysis process. Each team or work group leader is expected to give adequate
information about his/her subunit of the entire project work and the project manager is
expected to oversee this activity.With proper analysis of risk, a project manager and a
team will develop a realistic project plan.
However, risk factor analysis is not precise. In a world with risks, no one can be precise.
Risk factor does keep the buffers reasonable ,enable project managers to make provision
for uncertainties and let each team member know that although there are buffers, they are
needed for real uncertainties and do not allow any room for slacking on task efforts.

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 LIST OF TABLES

Table 1.0 Comparison of Typical Risk Management Processes 18

Table 4.1 Project Activity List 27
Table 4:2 Project Time Estimate 31
Table 4.3: Probability of Overrun 35
Table 4.4: Risk Factor Determination 36
Table 4.5: New Activity duration 37
Table 4.6: Project Critical Activities 39

Table 4.7: Risk Grading Matrix 42

Table 4.8: Probability Rating Matrix 42
Table 4.9: Impact Rating 43
Table 4.10: Activity Categorisation 43
Table 4.11: Risk Mitigation Plan 45
Table 4.12 Other Potential Problems and Mitigation Strategies 48

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 LIST OF FIGURES

Figure 4.1: Activity Network Diagram 30

Figure 4.2: Risk-free Schedule 33
Figure 4.3: Risk- free Gantt Chart 34
Figure 4.4: Risk-Incorporated Gantt Chart 38

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 TABLE OF CONTENT
Title page i
Certification ii
Dedication iii
Acknowledgement iv
Abstract v
List of Tables vi
List of figures vii
Table of content viii
Chapter One
1.0 Introduction 1
1.1Background of study 1
1.2 Statement of the problem 3
1.3 Objectives of the study 3
1.4 Justification of the study 3
1.5 Outline of succeeding chapters 4
Chapter Two
2.0 Literature review 5
2.1 Project risk analysis and management 5
2.2 Project risk or project uncertainties 8
2.3 Project risk categorizations 9
2.4 Risk analysis 12
2.5 Quantitative risk analysis 13
2.6 Risk management process 17
2.7 Previous works on risk analysis and management 20
Chapter Three
3.0 Methodology 22
3.1 Theoretical consideration 22

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3.2 Method of data collection 24
3.3 Procedure for obtaining data 25

Chapter Four
4.0 Data collection, analysis and interpretation of results 27
4.1 Work breakdown structure 27
4.2 Creating the risk free Gantt chart 31
4.3 Categorisation of risky activities 41
4.4 Risk mitigation 44

Chapter Five
5.0 Conclusion 50
References 51

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