Monte Carlo Meets the Board
A rail signalling project has run a quantitative schedule risk analysis. The model outputs P50 completion in month 26, P80 in month 31, and P90 in month 34. The contractual completion date is month 28. The analysis identified the top three drivers: approval of a safety case by the regulator (contributing 40% of schedule variance), availability of specialist installers (25%), and interface testing with the existing signalling system (20%). The project board has a risk appetite statement that says the organisation is 'prepared to accept moderate schedule risk but not regulatory non-compliance risk'. The project manager proposes to present the P50 date to the board as the plan, with the P80 held as 'internal contingency', and to focus mitigation effort on installer availability because it is the easiest to influence.
1. Evaluate the project manager's proposal against the board's stated risk appetite and the SRA outputs.
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The proposal is inconsistent with the appetite statement on two counts.
- Presenting P50 as the plan. P50 means a 50% chance of missing the date - a coin flip. Against a contractual date of month 28, P50 (month 26) gives only a two-month buffer for a distribution whose P80 is month 31. Presenting P50 as the plan and P80 as 'internal contingency' hides from the board that the contractual date sits between P50 and P80 - i.e. there is materially more than a 20% chance of missing the contract date. That is not 'moderate' schedule risk; it is an undisclosed exposure.
- Focusing on the easiest driver, not the biggest. The regulator's safety-case approval drives 40% of variance and is explicitly the risk the appetite statement says is not acceptable. The proposal directs effort at the 25% driver because it is tractable. Effort should follow exposure and appetite, not convenience.
The board cannot exercise governance over a risk profile it has not been shown. Presenting P50 as 'the plan' is a presentational choice that suppresses the decision the board needs to make.
2. Recommend what the project manager should present to the board and what response actions should follow from the SRA, prioritising correctly.
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What to present
- The full distribution: P50 month 26, P80 month 31, P90 month 34, against the contractual month 28. State plainly the probability of missing month 28 (between 50% and 80% - interpolating, roughly 60–65%).
- The driver decomposition with contribution percentages, so the board sees where the variance lives.
- The appetite mismatch: regulatory approval is the largest driver and is the category the board has said it will not accept.
Response priorities
- Safety-case approval (40%) - this is the appetite breach. Actions: engage the regulator early, agree the submission content and acceptance criteria, resource the safety case adequately, and track it as a critical-path risk with a named owner. This is the highest priority despite being least controllable.
- Interface testing (20%) - plan early interface trials and a fallback test strategy; this is influenceable and sits on the critical path.
- Installer availability (25%) - worth action (framework agreements, early booking) but should not absorb the mitigation budget ahead of the regulatory risk.
Governance - set the plan date at a level the board consciously chooses (P80 is defensible if the board accepts the cost), and record the accepted exposure. Do not present P50 as the plan.