“volatility per se, be it related to weather, timing of the morning newspaper, is simply a benign statistical probability factor that tells us nothing about risk until it is coupled with a consequence,” – Robert H. Jeffrey, “A New Paradigm for Risk,” Journal of Portfolio Management, Volume 11, Number 1 (Fall), pp. 33-40.

When we speak about capturing ranges of duration or cost, or speak about compliance with technical performance measures and do not speak about the consequences, then we're pretty much wasting our time with Risk Management.

Here's The Core Problem(s)

• When capturing the estimates using what every method you choose – I'd recommend NOT asking the estimator the Hi, Most Likely, and Lo for lots of reasons discussed else where – more information is needed than just the numbers.
• After eliciting the ranges of values, the probability distributions can then be used to drive a Monte Carlo simulator. This approach produces a Credible forecast of the probability of completing On or Before a Date or having the project cost A Value or Less.
• When static 3 point estimates are used, there can be up to a 27% unfavorable (under estimating) of the completion date. So don't use 3 points and don't use PERT.
• There is a whole cottage industry on why the PERT formulas are bogus and the problems with them. Here's a start “Why PERT Has Problems.”

For places to look for PERT background start with:

[1] “Quantitative Risk Analysis for Project Management,: A Critical
Review,” Lionel Galway, Rand Working Paper, WR-112-RC, February 2004.
[2]
“The Polaris System Development: Bureaucratic and Programmatic Success
in Government,” Harvey M. Sapolsky, Harvard University Press, 1972.
[3]
“PERT Completion Times Revisited,” Ted Williams, University of
Michigan-Flint, School of Management, Working Paper 2005-02, September
2005.
[4] “Hidden Assumptions in Project Management Tools,” Dr. Eva
Reginier, DRMI Newsletter, January 10, 2006, Naval Postgraduate School,
Monterey CA.
[5] “Activity Completion Times in PERT and Scheduling
Network Simulation,” Dr. Eva Reginier, DRMI Newsletter, April 8, 2005,
Naval Postgraduate School, Monterrey CA.

Source: Herding Cats