DECISION TREE. Project Risk Management: A combined Analytic Hierarchy Process and Decision Tree Approach Dr.Prasanta Kumar Dey. CONTENT. What is the decision tree? The example of decision tree The advantage of decision tree The application of decision tree. WHAT IS THE DECISION TREE?.
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DECISION TREE Project Risk Management: A combined Analytic Hierarchy Process and Decision Tree Approach Dr.Prasanta Kumar Dey
CONTENT • What is the decision tree? • The example of decision tree • The advantage of decision tree • The application of decision tree
WHAT IS THE DECISION TREE? • Decision tree is a decision support tool that uses a tree-like graph or model of decisions and their possible consequences, including chance event outcomes, resource costs, and utility. • Decision tree is commonly used in operations research, specifically in decision analysis, to help identify a strategy most likely to reach a goal. • Another use of decision trees is as a descriptive means for calculating conditional probabilities.
THE ADVANTAGE OF DECISION TREE • Are simple to understand and interpret. • Have value even with little hard data. • Use a white box model. • Can be combined with other decision techniques.
Project Risk Management: A combined Analytic Hierarchy Process and Decision Tree Approach Dr.Prasanta Kumar Dey
RISK MANAGEMENT PROCESS • Risk identification • Risk analysis • Risk response
METHODOLOGY • Identifying the work packages for risk analysis. • Identifying the factors that affect the time, cost, and quality achievement of a specific work package. • Analysis the effect and determining severity of failure • Driving various alternatives responses for mitigating the effect of risk factors. • Estimating cost for each alternative • Determining the probability and severity of failure of a specific work package • Forming a decision tree. • Deriving expected monetary value or the cost of risk response in this case. • Selecting the best option statistical analysis.
IDENTIFICATION OF WORK PACKAGES • Riving crossing • Pipeline laying • Stations construction • Telecommunication and SCADA system
IDENTIFICATION OF RISK FACTORS • Technical Risk • scope change • technology selections • implementation methodology selection • Equipment risk • materials risk • Engineering and design change • Acts of God • normal natural calamities • abnormal natural calamities
Financial, Economical and Political Risk • inflation risk • fund risk • changes of local law • changes in government policy • improper estimation • Organization Risk • capability risk of owner’s project group • contractors failure • vendor’s failure • consultant’s failure
Statutory Clearance Risk • environmental clearance • land acquisition • clearance from chief controller of explosives • other clearance from government authorities
DECISION ALTERNATIVES • do nothing • carrying out detailed survey • using superior technology • engaging an expert project team • taking all responses
RISK RESPONSES • To avoid • To reduce • To transfer • To absorb
CONCLUSION • Risk management using a combined AHP and DTA provides an effective means for managing a complex project efficiently. • Risk management makes an effect to quantify risk by modeling its probability and severity in line with the perceptions of experienced project executives subjectivity.
REFERENCE • http://en.wikipedia.org/wiki/Decision_tree • http://www.mindtools.com/dectree.html • http://zh.wikipedia.org/zh-hk/%E5%86%B3%E7%AD%96%E6%A0%91