Event Chains
Some risk events can trigger other risk events automatically, or transform an activity to another state. In this case, the series of risk events together form risk event chains. These risk event chains can significantly affect the course of the project. For example, requirement changes can cause an activity to be delayed. To accelerate the activity, the project manager diverts resources from another activity that then leads to a missed deadline. Cumulatively, this reaction could lead to the failure of the whole project.
Risk event chains can be defined in several different ways. For example, a single event type can be defined as "Change probability of the particular risk". In this case, one risk event triggers another event. Another way to define event chains is to use an event "Start another task" or "Execute Mitigation Plan". Event chains must by identified in the same manner (names) as single events. The concept is similar to the use of "hammocks" in project scheduling.
Figure 2: Connected events forming a chain
Critical Event Chains
The single events or the event chains that have the most potential to affect the projects are the "critical events" or "critical event chains". By identifying critical events or critical event chains, we can mitigate their negative effects. These critical event chains can be identified by analyzing the correlations between the main project parameters, such as project duration or cost, and other event chains.
Monte Carlo Simulations
Once events and event chains are defined, quantitative analysis using Monte Carlo simulation can be performed to quantify the cumulative impact of the events. Probabilities and impacts of risks are used as input data for Monte Carlo simulation of the project schedule. In most real life projects, it is necessary to supplement the information regarding the uncertainties expressed as an event with distributions related to duration, start time, cost, and other parameters.
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