The Challenges Of Earned Value Management And Risk Management

In today’s uncertain economical business environment there is an understandable pressure to improve the quality of decision making at all stages of the project. A number of techniques have been developed to address this concern, two of the leading approaches used in the construction industry are Earned Value Management and Risk Management (Hillson, 2004), those two approaches share a common aim of providing decision makers with the best information available when setting objectives and considering management strategies. However, they take differing approaches, Earned Value Management establishes project performance status and extrapolates that information to gain an understanding of future trends and the allocation of resources needed to successfully

Those scholars highlighted the value of the Earned Value Management in estimating the costs of projects at completion based on various measurable and estimable costs and the schedule of a project. Despite of their extensive studies, leaders in project management face continuous problems and challenges relating to Earned Value Management, for instance Earned Value Management leverages the past state of current projects to predict future performance, which can limit its applicability in some situations because Earned Value Management alone cannot predict strategies to anticipate future events that are not contingent on past performance (PMI,

It is possible to conduct Earned Value Analysis and Risk Analysis to expose underlying drivers of performance but both techniques emphasis the need to move from analysis to management using the information to support proactive decision making. Consequently both Earned Value Management and Risk Management encourage those using the techniques to make appropriate management action based on the results and not to stop at mere analysis (Hillson, 2004). Earned Value Management is used to monitor progress to date and based on this and consideration of the forward plan make predictions of actual spends and schedule completion. The Risk Management on the other hand is forward looking and bases its predictions on potential risk and opportunity impacts and the anticipated affects of mitigation actions (Welch and Jonas,