How to Use PERT for Risk Management

What is PERT?

PERT, or Program Evaluation and Review Technique, is a project management tool to plan, evaluate, and control complicated projects. It was introduced in the 1950s by the US Navy for the Polaris Submarine Project. Its purpose is to analyze, review, and present the tasks of a project.

It can also precisely calculate 3 major time estimates for the completion of a project; the shortest possible duration, the most probable duration, and the longest possible duration.

How does it work?

A PERT chart, created using software or Microsoft Excel, employs nodes represented by circles or rectangles to illustrate the tasks involved in a project. Each node is linked to another node, indicating the sequence in which the tasks should be performed.

Items on different task lines but at the same step of production are independent of each other. PERT charts are valuable assets for project managers as they not only give insights into time management but also help them determine the budget of the project.

Disadvantages of PERT:

Creating PERT charts is a complex task requiring a lot of time and effort.
It solely focuses on representing and calculating the duration of each task, ignoring other important factors such as resource allocation, cost management, and quality control.
It assumes that tasks are independent and do not include resource constraints or task interactions.
Any inaccurate time estimate can lead to misleading results and delays.
PERT does not work well with other management tools such as cost management or risk assessment frameworks.
It might underplay the importance of non-critical tasks by only emphasizing the critical tasks.
With the changing project requirements, PERT charts can quickly become outdated. Therefore, they need frequent revisions.

Using PERT for Risk Management:

PERT and risk management are tightly connected. PERT being a project management tool helps in identifying, assessing, and eliminating project risks through its structured approach. It also identifies the critical path in any project, allowing project managers to focus on high-risk areas.

Following are some detailed instructions on how to use PERT for risk management:

Determine Project Tasks:

The first step towards identifying the project tasks is to break down the project or major deliverables into smaller, workable tasks according to a process called Work Breakdown Structure (WBS).

Determine which task should precede other tasks by analyzing the urgency of each task. For instance, you might need to complete the designing phase before moving on to other tasks such as production, etc.

Estimating Duration of the Task:

Gather time estimates; shortest possible time, probable time, and the longest possible time to calculate the expected duration. Use the designated PERT formula to determine the duration:

Expected Duration (TE)= O+4M+P/6

This will give you the expected time duration for the task.

You also need to calculate the variance to know about the risk or uncertainty attached to each task through the following formula:

Variance (V)=(6P−O) 2/6

Create a PERT Chart:

Start creating a PERT chart where each task is represented through either a circle or a rectangle and the dependencies are represented through arrows connecting each task. Label each node with its assigned task name and duration.

Draw a critical path which is the longest line through the diagram and represents the shortest possible duration of the entire project. Tasks present on this path are highly important and can not be messed with. Any delay in these tasks will likely cause a delay in the completion of the project.

Identify the Risks:

Assess the risks or uncertainty within each task through the PERT variance formula. A higher variance will indicate a higher risk. Use probability distribution to predict the likelihood of completing tasks on time.

Analyze how a delay or failure in completing a critical task can impact the overall schedule. Assess if multiple delays have caused a jump in the uncertainties.

Develop Strategies to Mitigate Risks:

Prepare contingency plans like backup resources or alternative methods in case of delay in a critical task. Add buffer times for each time to address the problems effectively. Keep tracking the progress of the project by continuously monitoring the PERT chart.

Be transparent with the stakeholders and keep them updated about any potential risks and the steps taken to mitigate them.

Review and Refine:

Be consistent in reviewing the tasks each day for any adjustment needed. Do a post-project analysis to document the lessons learned for the future. Analyze the risks and how to tackle them in the future.

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Conclusion:

PERT can be a beneficial aid in managing your projects. By breaking down tasks, estimating durations, and creating a detailed PERT chart, you can focus on critical areas of the project and easily manage the risks and uncertainties of the project. However, careful consideration and consistency in reviewing each task can save you from unexpected risks. Embrace PERT to ensure a perfect project.