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Qualitative Risk Analysis: Don’t Lose Your Objectivity

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Categories: PMO, Risk Management, Tools


By Mario Trentim

In my last post, I discussed the importance of getting risk identification right. Now, it’s time to tackle the challenge of qualitative risk analysis—which project practitioners often tend to confuse with subjective analysis.

Objective vs. Subjective Analysis

Subjective analysis is based on personal opinions, interpretation, points of view, emotions and judgment. It is often ill-suited for decision making and, in particular, for risk analysis.

Objective analysis is fact-based, measurable and observable. For qualitative risk analysis that means using scales to evaluate risk, whether textual (low, medium, high), color-coded (green, yellow, red) or numeric (from 1 to 5), or some combination of these.

Getting Qualitative Risk Analysis Right

Consider this all-to-common scenario: In a project team meeting to assess risks, the only available information is the risk name and the words high, medium and low. Because there is no definition on what high, medium and low mean, and because there is not enough information about individual risks, the risk analysis is based on guesses.

So how can project practitioners stop the guessing game and ensure objectivity? Here are seven tips:

1. Consult tools and standards: Qualitative analysis tools are mentioned not only in PMI’s A Guide to the Project Management Body of Knowledge (PMBOK® Guide) but also in PMI’s Practice Standard for Risk Management. For more risk management reference material, check ISO 31000:2009 and ISO 17666:2003.

2. Define qualitative scales in the risk management plan: The Committee of Sponsoring Organizations of the Treadway Commission’s Risk Assessment in Practice has created some good examples of what impact and probability scales could look like. (See pages 4 and 5). You may also want to check the Project Risk Management Handbook: A Scalable Approach (page 20).

3. Gather and document information about identified risks: Interview and involve relevant stakeholders, review lessons learned, document assumptions and information for each risk.

4. Adopt expert opinion, whenever possible: Get a second opinion from more experienced project managers, project management office leaders and other internal experts. If you are not familiar enough with risk identification and analysis for a particular project, hire external experts or consultants.

5. Consider using a risk breakdown structure: Grouping risks in categories helps in identifying root causes and in developing effective responses.

6. Assess probability, impact and urgency for individual risks: Investigate the likelihood of occurrence for each specific risk and its potential effect on project objectives (scope, schedule, cost), documenting the results according to the predefined qualitative scale levels.

7. Prioritize risks using the probability and impact matrix: Rate risks and develop your final probability and impact matrix to determine the need for further quantitative analysis and to plan for risk responses.

Adopting a well-defined qualitative scale and carefully assessing risk data and information will help your team perform better risk analyses. Do you agree with that? Please share your comments and experience.


Posted by Mario Trentim on: August 31, 2016 09:39 AM | Permalink

Comments (9)

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Savas Sakar Consultant/Trainer/Mentor| Savas Osman Sakar Project Management Training & Consultancy Istanbul, Türkiye
thx

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fosco frongia Senior project manager| ENTE PATRIMONIALE CHIESA GESU' CRISTO SUG Fino Mornasco, Como, Italy
very interesting article
many thanks

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Mauro Sotille Chair, Senior Consultant / Project Manager| PM Tech Consulting Porto Alegre, Rs, Brazil
Veri good Mário. Abraços.

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Mario Trentim CEO| PMO Global Alliance Sao Jose Dos Campos, Sao Paulo, Brazil
Thanks, my friend Mauro!

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Mauro Sotille Chair, Senior Consultant / Project Manager| PM Tech Consulting Porto Alegre, Rs, Brazil
Very :-)

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Andrea Uvanni Quality Program Manager| BE&K Building Group Schenectady, Ny, United States
Thanks for a great read and helpful links!



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Vincent Guerard Coach - Trainer - Speaker - Advisor| Freelance Mont-Royal, Quebec, Canada
Thanks Mario
Well summarize plus all the links

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Karthik T Senior Engineering Manager| Nike Bangalore, Karnataka, India
Great points, thanks

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Chanukya Rajagopala Director - IT Strategy - R & D| iPOCA Private Ltd United Kingdom
Well said. Good article. Risk management requires such advisory.

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