On the fallacy of averages in project risk management

On the fallacy of averages in project risk management

Managers recognize the presence of uncertainty in the estimates of the various parameters of their projects, but usually circumvent the required analysis (which can be demanding) by replacing the random variables by their averages. This paper argues against such practice. It demonstrates that gross...

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Veröffentlicht in:European journal of operational research 2005-09, Vol.165 (2), p.307-313
1. Verfasser: Elmaghraby, Salah E.
Format: Artikel
Sprache:eng
Schlagworte:
Applied sciences
Cost estimates
Exact sciences and technology
Operational research and scientific management
Operational research. Management science
Operations research
Project management
Project planning
Random variables
Resource allocation
Risk management
Risk theory. Actuarial science
Stochastic work content
Studies
Uncertainty
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Beschreibung
Zusammenfassung:Managers recognize the presence of uncertainty in the estimates of the various parameters of their projects, but usually circumvent the required analysis (which can be demanding) by replacing the random variables by their averages. This paper argues against such practice. It demonstrates that gross errors can be committed in cost estimates and in the bids based on them.
ISSN:0377-2217
1872-6860
DOI:10.1016/j.ejor.2004.04.003