To get perceivable project risks tangible and appraised, an Operations Research Analysis on success/failure cause research, as well as further technical investigations on the most relevant economic key performance indicators of the planned undertaking and its CAPEX drivers is a must. Operations research, or operational research in British usage, is a discipline that deals with the application of advanced analytical methods to help make better decisions. Because of its focus on practical applications, it overlaps with industrial engineering and operations management and draws on psychology science. It often must quantify execution risks of real-world objectives and has become an area of active academic and industrial research.
The usual procedure of a Bayesian probability assessment for such a Causal Model is to
- formulate as many reasonable hypotheses as possible about what may happen;
- construct a probability density function by prior similar scope project experiences published (e.g. Reports of Subsidized Lighthouse projects) for each hypothesis;
- construct a function giving the probability of previously observed failure root causes to comparable projects, potentially also applicable to the assessment target;
- combine the above information coherently to produce an overall probability distribution;
- construct a Stage-Gate validation path starting at point of highest failure probability to ‘scan’ over high probability aspects, then intermediate probabilities and finally low probability issues;
- revise all the probabilities continuously during the progress by applying Bayes’ theorem.
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