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Topics: Risk Management
Why the PMI consider that Qualitative Risk Analysis addresses individual risks descriptively (Risk-level)?
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Why the PMI consider that Qualitative Risk Analysis addresses individual risks descriptively (Risk-level) and Quantitative Risk Analysis address the overall risk to project objectives (Project-level)?!. I think Qualitative Risk Analysis also can address the overall project risk using Project Risk Score by adding the risk score for the individual risks on the project (risk score = probability * impact) and then divide that sum by the number of risks. can anyone clarify please.
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Ahmed -

Nothing prevents you from mapping the qualitative analysis of individually identified risks to numerical values and then aggregating those in some manner, but a key focus of qualitative risk analysis is to enable stakeholder to focus their risk management efforts on the "vital few".

Kiron
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1 reply by Ahmed Sherif
Apr 04, 2018 8:35 AM
Ahmed Sherif
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PRACTICE STANDARD FOR PROJECT RISK MANAGEMENT, page 31 , second paragraph:
"Assessing individual risks using qualitative risk analysis evaluates the probability that each risk will occur and the effect of each individual risk on the project objectives. As such it does not directly address the overall risk to project objectives that results from the combined effect of all risks and their potential interactions with each other. This can however be achieved through use of quantitative risk analysis techniques (see Chapter 7)."
This part made me confused.

Thanks,
Ahmed
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An example would be Risk Severity. This data is usually gathered qualitative and yet decisions are made based on their number categorization in the risk severity matrix.
Network:38



Apr 04, 2018 8:18 AM
Replying to Kiron Bondale
...
Ahmed -

Nothing prevents you from mapping the qualitative analysis of individually identified risks to numerical values and then aggregating those in some manner, but a key focus of qualitative risk analysis is to enable stakeholder to focus their risk management efforts on the "vital few".

Kiron
PRACTICE STANDARD FOR PROJECT RISK MANAGEMENT, page 31 , second paragraph:
"Assessing individual risks using qualitative risk analysis evaluates the probability that each risk will occur and the effect of each individual risk on the project objectives. As such it does not directly address the overall risk to project objectives that results from the combined effect of all risks and their potential interactions with each other. This can however be achieved through use of quantitative risk analysis techniques (see Chapter 7)."
This part made me confused.

Thanks,
Ahmed
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1 reply by Sergio Luis Conte
Apr 04, 2018 8:53 AM
Sergio Luis Conte
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That is intended to explain the use of one thing only instead of both (qualitative and quantitative).
Network:1601



Apr 04, 2018 8:35 AM
Replying to Ahmed Sherif
...
PRACTICE STANDARD FOR PROJECT RISK MANAGEMENT, page 31 , second paragraph:
"Assessing individual risks using qualitative risk analysis evaluates the probability that each risk will occur and the effect of each individual risk on the project objectives. As such it does not directly address the overall risk to project objectives that results from the combined effect of all risks and their potential interactions with each other. This can however be achieved through use of quantitative risk analysis techniques (see Chapter 7)."
This part made me confused.

Thanks,
Ahmed
That is intended to explain the use of one thing only instead of both (qualitative and quantitative).
Network:2355



Let me try to help clear this up.
So you completed your risk identification and you ended up with 100 risks. Using Qualitative methods you subjectively rate the risks base on probability and impact.
After you completed your rating and then sorted you find that 80 of those risks have a low rating (low impact and/or probability). These 80 risks you may decided to Avoid or Accept or Mitigate them. Or move them to a watchlist. So now you have 20 risks that are rated high. You can say, I have 20 risks and their ratings all add up to 80. What does that really tell you? What does this rating really mean? You say they have a high probability to impact the project, but what kind of impact?
Here is where Quantitative Analysis comes in.
You have 20 high rated risks that may affect the project as a whole. Often they will significantly impact the Cost or Schedule of the project. By conducting Quantitative Analysis you can get an objective view of the risks.
For example, you can use EMV to understand the financial impact of the risk. There is a 50% chance that risk 1 will occur and cost $20,000 and a 25% chance that risk 2 will occur and cost $40,000. Using this analysis, you can plan your contingency budget of $20,000. See you are combining the chance of occurrence times the cost of all 20 risks and then adding that amount together to know how much money to set aside for the risks.
There are additional quantitative tools that will measure the impact on the schedule or other ways to measure the impact on the cost..
After performing Quantitative Analysis on these 20 risks as a whole, you may see that the impact of the risk is more than your Risk Averse customer is willing to commit to. At this point you can decide that the project is not viable at this time and you will have data to back you up.
The point with Quantitative Analysis, it is more time consuming which is why it is not done on all risks. But it gives you a different and objective view of the data.
Does that help?
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1 reply by Ahmed Sherif
Apr 05, 2018 4:43 AM
Ahmed Sherif
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Thank you very much Dinah ..... well explanation .
Network:474



As far as I could see, 'initial treatment', like categorization, probability, at which process it occurs must be done in qualitative basis.
The reliability of source of risk data, urgency of risk response, time wise & priority wise-all these can be handled better qualitatively with knowledge & experience.
Quantitative risk analysis integrates risk analysis efforts to the overall risk to project objectives.
As mentioned overall risk means one must have ratings & hence rankings from project objectives point of view which leads to Quantitative risk analysis.
Personally, many times I have experienced very thin line between the two.
Network:145



Well explained Dinah!
Just adding a little bit more. In risk identification process some risks may even be identified that require immediate response planning prior to qualitative and quantitative risk analysis (RA). Qualitative RA is done to rate and prioritize risks after identification a large number of risks. Quantitative RA is done on prioritized risks and for contingency planning as well-it is time consuming and depend on the risk approach of the project.
Network:38



Apr 04, 2018 9:39 AM
Replying to Dinah Young
...
Let me try to help clear this up.
So you completed your risk identification and you ended up with 100 risks. Using Qualitative methods you subjectively rate the risks base on probability and impact.
After you completed your rating and then sorted you find that 80 of those risks have a low rating (low impact and/or probability). These 80 risks you may decided to Avoid or Accept or Mitigate them. Or move them to a watchlist. So now you have 20 risks that are rated high. You can say, I have 20 risks and their ratings all add up to 80. What does that really tell you? What does this rating really mean? You say they have a high probability to impact the project, but what kind of impact?
Here is where Quantitative Analysis comes in.
You have 20 high rated risks that may affect the project as a whole. Often they will significantly impact the Cost or Schedule of the project. By conducting Quantitative Analysis you can get an objective view of the risks.
For example, you can use EMV to understand the financial impact of the risk. There is a 50% chance that risk 1 will occur and cost $20,000 and a 25% chance that risk 2 will occur and cost $40,000. Using this analysis, you can plan your contingency budget of $20,000. See you are combining the chance of occurrence times the cost of all 20 risks and then adding that amount together to know how much money to set aside for the risks.
There are additional quantitative tools that will measure the impact on the schedule or other ways to measure the impact on the cost..
After performing Quantitative Analysis on these 20 risks as a whole, you may see that the impact of the risk is more than your Risk Averse customer is willing to commit to. At this point you can decide that the project is not viable at this time and you will have data to back you up.
The point with Quantitative Analysis, it is more time consuming which is why it is not done on all risks. But it gives you a different and objective view of the data.
Does that help?
Thank you very much Dinah ..... well explanation .

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