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Hyderabad, India
Risk Management - Qualitative Risk Analysis
December 20, 2009
... a process of prioritizing risks for further analysis or action by assessing and combining their probability of occurrence and impact.
-Definition of Qualitative Risk Analysis, PMBOK 4
S
imply put, Qualitative Analysis is the process of analyzing the Probability and Impact of a risk. It involves answering some basic questions.
  1. What are the odds of a risk occurrence? Are they one to one, 1-10, 1-100, one in a million?
  2. When it occurs, how big of an impact does it have?
  3. When it occurs, how much time would we have to effectively respond to the occurrence?
Analysis Techniques:
  1. Probability and Impact Assessment - We can do this assessment in any number of ways. What I found to be more effective is a team meeting. Get together with the team, go through each identified risk, analyze it and make an assessment. Based on the assessment, throw the risk into a High/Medium/Low category. You would have defined what these categories mean in your Risk Management Plan.
  2. Probability and Impact Matrix - Based on the assessment, build a matrix and assign a rating to each risk. The rating rules are typically specified by your organization, are customized (or tailored) for your project needs and documented in your Risk Management Plan. You can prioritize the risks based on this matrix and tackle them according to the priority (Critical, High, Medium, Low etc.). This is your guide to plan your responses.
  3. Data Quality Assessment - This tool may be used to answer the following questions. Is the information gathered to support the risk credible and/or reliable? Do we have a complete understanding of the risk (or did we miss something)? Has the information been compromised (or biased)? A negative answer to any of these questions may require gathering of further information.
  4. Categorization - Grouping or Categorize the risks based on the areas that are most vulnerable (impacted areas). This can be done using the RBS (if you have built one), the WBS (your project task list), root causes of the risks, and/or the phase of the project where the risk would fall (or impact).
  5. Urgency Assessment - Assess how urgently you must react to a risk. Do we need to respond to it now, in the short term, or later (in the long term)? Or do we need to do both?
  6. Expert Judgment - Or the SME Gut Feel. Get together with the experts from the risk area, or who have handled similar projects or dealt with similar risks, and ask them. Take their expert advice. Just keep in mind that their advice may come with their own bias in the area.
Output:
Regardless of the combination of tools you employ, it almost always involves individuals or groups from your project team in addition to any others. The owners of the affected area(s) of the risk help determine the impact and probability. Beyond all this, it is you as the project manager, and your judgment that enable you to set the appropriate priority. Further, it is your judgment and timeliness that enables you to bring the right visibility to the risk, upgrade it as an issue (when required) and/or mitigate the risk or resolve the issue for the success of the project.
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