Information on Risk and Contingency Analysis
using Monte Carlo Simulation
This section lists some articles which give background information on using Monte Carlo simulation to determine the capital risks involved, and the contingency required on capital construction projects.
Click on the links below to read the articles.
- How to use Monte Carlo simulation to calculate the project cost contingency required
This article describes how the cost estimate for a project should be built up by estimating the potential cost variation for each item. The variations and risks for each of the items are then combined using Monte Carlo simulation to give the overall risk and required contingency for the project as a whole.
- Why project costs are expected to overrun
It is found all too often that project costs overrun their budgets. The literature is full of reasons and excuses for these overruns. However, if we are not careful it is very easy to set up the budget in such a way that the project is virtually guaranteed to be overspent. This article reveals the problem hidden in many estimates and describes the tools that can be used to ensure that the risks are properly addressed.