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Project risk: Statistical distributions or single point estimates?

Risk management requires analytical skills and basic knowledge of statistics, which is often perceived as mathematically complex and sometimes theoretical and far from practice. However, a basic understanding of probability and distribution functions allows the project manager to better estimate the effects of unexpected events on the project outcome. The use of single point estimates for the project data, such as activity durations and costs or the value of the time-lags between project activities (see “Activity links: How to add precedence relations between activities?”), often leads to unrealistic project estimates due to the inherent uncertainty that typifies these projects. Therefore, the use of statistical distributions is crucial for a thorough and realistic analysis of the project as a preparation of its future progress which will be characterized by changes compared to the original point estimates.

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