The Project Management Body of Knowledge (PMBOK Edition 6) advocates the use of Monte Carlo simulation for performing quantitative risk analysis.
In the project management discipline, Monte Carlo method, or probability simulation, is a computer-based mathematical technique used to understand the impact of risk and uncertainty. Its most common use is in the creation of the project schedule and the determination of the project end date. The Monte Carlo method was invented by scientists working on the atomic bomb project in the 1940s. They named the method after the city in Monaco famed for its casinos and games of chance.
Monte Carlo simulation provides a number of advantages over deterministic, or single-point estimates:
Helps to evaluate the overall risk in the project.
Converts uncertainty on the project into tangible numbers to assess the overall impact to the project.
It can be applied to assess the … Read More »