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- How Monte Carlo Simulation Works.
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One reason is that project managers lack effective and practical tools to manage software risks. Also, which software is required to run this simulation?
What is Monte Carlo Simulation?
You only come up with your estimates, and input these information into the program. The program will do the calculation for you. There are many Monte Carlo simulation software available on the net. Just search it on Google and you will get many. Thank you so much Fahad!
Risk Management and Simulation - CRC Press Book
Very helpful! I have my exam scheduled on Sept 9th and i am going through all the anxiety to clear this exam. I have a small concern, what would be the inputs that are mandate to run this tool. For example Calculating the schedule we would need all the activity with there estimates, risk assessment done for all the activities and what else that is required.
You will need to enter the estimated duration for activities, such as most likely, pessimist and optimistic.
If you are asking about how the Monte Carlo Method is working It is working by generating random according to predefined probabilities samples then calculating the overall probability. In this blog post, this is an assumed data. You will get the real data when you enter correct data in Monte Carlo simulation software.
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Thanks Fahad. This just gave me happiness after a long search for MC. On what basis can these estimates be based—-on past knowledge, pattern knowledge or future knowledge? What do you mean by simulation cannot be performed on Single activity but all activities. And then again, risk assessment must be performed on each activity?
Do you mean, one must know all the activities that must be carried out to complete a task, the run MC simulation risk analysis on each of these activities? You are right, most books just give a brief description and also there are no questions on this topic in most of study material I have been through.
Simulation Optimization: Applications in Risk Management
Can you please let us know what kind of questions are encountered on the PMP exam? Thanks to brother Fahad and the reader. I have gone throgh the article and coments. Example You must have duration estimates for each activity to perform the Monte Carlo simulation to determine the schedule. Now, if we run the Monte Carlo simulation for these tasks five hundred times, it will show us results such as: Please note that the above data is for illustration purpose only, and is not taken from an actual Monte Carlo simulation test result.
Some of these limitations are as follows: You input three estimates for an activity to run the Monte Carlo simulation. Your result will not give you a correct analysis if you show some bias in determining the estimates.
What is a Monte Carlo Simulation?
Therefore, the results depend on the quality of your estimates. The Monte Carlo simulation shows you the probabilities of completing the tasks. It is not the actual time taken to complete the task. The Monte Carlo simulation technique cannot be applied to a single task or activity; you need to have all activities, and the risk assessment completed for each activity.
Monte Carlo Simulation and Human Risk
You will need to buy an add-on or a software program to run the Monte Carlo simulation. Benefits of the Monte Carlo Simulation The Monte Carlo simulation method has many benefits in project management, such as: It helps you evaluate the risk of the project. It helps you predict chances of failure, and schedule and cost overrun.
It converts risks into numbers to assess the risk impact on the project objective. It helps you build a realistic budget and schedule. It helps you gain management support for risk management. It helps you in decision making with the support of objective data. It helps you to find out the chances of achieving your project milestones or intermediate goals.
Summary The Monte Carlo simulation is an essential tool and technique in the quantitative risk analysis process which helps you make decisions based on objective data.
Facebook Twitter LinkedIn Email. WaSalaam, You only come up with your estimates, and input these information into the program. Assalam o Aleikum, Brother, In above example, Activity A will have pert estimate equal to 5 instead of 4. It was very informative. Thanks Mike for you visiting and leaving your comment. Nice article… The way of explanation is very good….
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