ABSTRACT
This chapter illustrates the Monte Carlo method using very small amounts of sample data. To use this technique on a significant project would need the use of specialist software. Specific risks normally have two aspects: the likelihood of occurrence and the severity of the impact. The objective of producing a risk model is to inject a degree of realism into plans. This is done by applying ranges of possible costs and durations to the deterministic (single point) estimates. These ranges are called input distributions: minimum possible value; the most likely value; maximum possible value. A common example of this is found in the oil and gas industry. When installing an oil rig at sea, many important items of equipment must be lowered into position by a crane mounted on a barge. There are many documented cases of cranes dropping key items of equipment. The resulting repair or replacement costs amount to millions of pounds.
