Risk analysis technique for assessing project contingency using approximate reasoning approach: A prototype study

Both subjectivity and complexity are considered to be major sources of uncertainty that may lead to financial loss. The complex and dynamic nature of projects, along with the unsuccessful delivery of products on time and within budget, have created the need for developing analytical techniques that have an objective methodology.; This research was designed to investigate the concepts of risk and risk management and to develop an holistic approach for analyzing projects' risks. The application of approximate reasoning concepts of fuzzy set theory was investigated first; then, a systematic procedure for quantifying project risks and predicting cost contingency was proposed.; The end result of this research demonstrated that approximate reasoning technology has the potential capability to analyze the risks and uncertainties associated with projects; that is, it can provide a simple and reasonable method for assessing project contingency though not necessarily a better one. The modeling process of approximate reasoning technology needs only few linguistic rules and some numerical measures of both the likelihood of occurrence and the impact of the risk event to analyze the relationship between the input and output variables of a particular system and to define alternatives.