Capturing Risk Interdependencies: The CONVOI Method
Traditionally, risks impacting cost and/or schedules are often modeled as independent. However, it is often the case that the occurrence of one risk influences the probability of another occurring. For this reason, identifying and accounting for relationships between risks is essential to producing accurate cost estimates. Accounting for risk interdependence is often neglected by conventional risk analysis programs because risks are usually generated independently by technical experts focused on a single part of the system making it difficult to formulate and quantify relationships among risks. Even when risks are generated with the whole system in mind, it is rare for risk analysis programs to focus on the interactions among risks that affect different parts of the system. In this paper we introduce CONVOi, a process that overcomes the aforementioned obstacles and allows for the incorporation of risk interdependence into cost distribution simulations while requiring little additional effort outside the scope of traditional risk analysis/management. With CONVOi it is possible to achieve more accurate cost and schedule risk assessments, validate the likelihood of occurrence of risks, and better identify the root causes of risks allowing for more optimal risk mitigation strategies. To accomplish this, CONVOi correlates risks from a programs risk register using a cutting edge algorithm that can be incorporated into all COTS risk analysis tools.
Booz Allen Hamilton
Blake Boswell received a B.S. in Mathematics with concentrations in Statistics and Economics from Auburn University Montgomery in December of 2008. In 2009 he joined Booz Allen Hamilton’s Economic and Business Analysis Team as a Consultant. He currently provides programming and analysis support to the Financial Management division of the US Marine Corps System Command. Blake is also involved with intellectual capital efforts to advance the application of statistical techniques to Cost and Risk Analysis. As an undergraduate student, Blake was the recipient of multiple scholarships for academic excellence in the areas of Mathematics and Economics. His research interests include Applied Probability, Mathematical Economics, and Math Modeling and Simulation. He is a published author in the field of Economics, with papers involving computation of equilibriums in Industrial Organization models. Blake is currently pursuing a master’s degree in Applied Economics at Johns Hopkins University.
Booz Allen Hamilton
Mike Manchisi is currently pursuing a bachelor’s degree in economics at James Madison University. He interned the past two summers at Booz Allen Hamilton. In the summer of 2009, Mike was part of Booz Allen Hamilton’s Economic and Business Analysis Team where he researched risk and uncertainty analysis techniques with a focus on simulating correlation between conditional and marginal probabilities of risk occurrences. He also worked to improve the firm’s social networking capabilities. In the summer of 2008, Mike was an analyst with Booz Allen Hamilton’s Pricing Team where he provided pricing support for proposals.
Booz Allen Hamilton
Eric R. Druker CCEA graduated from the College of William and Mary with a B.S. in Applied Mathematics in 2005 concentrating in both Operations Research and Probability & Statistics with a minor in Economics. He is employed by Booz Allen Hamilton as an Associate and currently serves as President of the St. Louis Society of Cost Estimating & Analysis (SCEA) Chapter. In 2009, he was named SCEA’s National Estimator/Analyst of the Year for Technical Achievement. Mr Druker currently supports NASA’s Cost Analysis Division, performing joint cost & schedule risk analysis across a variety of projects. In his previous position as a Technical/Research Lead at Northrop Grumman, Mr. Druker developed the risk analysis process/methodology used to assess financial risk to the company during Independent Cost Evaluations (ICEs). As a part of this, he participated in or lead over 30 ICEs on Northrop Grumman proposals; briefing results to executive management including the President and CEO of Northrop Grumman. In addition to multiple SCEA conferences, Eric has been an invited presenter at The Naval Postgraduate School’s Acquisition Research Symposium, DoDCAS and NASA’s Project Management Challenge. Prior to coming to Booz Allen, he helped to develop Northrop Grumman’s Independent Cost Evaluation (ICE) risk analysis practices and served as lead author of the Regression and Cost/Schedule Risk modules for the 2008 Cost Estimating Body of Knowledge (CEBoK) update.