Qualitative Risk Analysis Tools, Definition, Examples

What is qualitative risk analysis definition? – Quantitative and qualitative risk analysis is an important concept from the PMP or CAPM Certification Exam point of view. If you are preparing for them, we recommend you to keep on reading to learn how to perform qualitative risk analysis with examples. Risk analysis is one of the most important steps in risk management. Some people think that spending more time with planning could be enough to respond to risks. However, considering the extensive content of risk management, creating just plans and putting them on the desk is not a good strategy to deal with problems. The more important thing is how you will take action quickly once a risk arises. So, how you will prioritize risks throughout the life cycle of your project. Risk managers conduct the risk analysis process to evaluate risks after identifying them.

What is Risk?

Before talking about perform a qualitative risk analysis process, let’s answer “what is risk?”. Typically, Risks can be defined as uncertain events or conditions that have the potential to impact one or more project objectives. Those impacts on various project elements (such as schedule, budget, scope, quality) or goals may be positive or negative. If the risks are positive, you need to establish risk response strategies for positive risks. If they are negative, risk response strategies for negative risks should be developed to mitigate their impact.

Assume that you are a risk manager working on a construction project, building an office for an organization. In general, many things are going as planned during the course of the project. In order to control the risks, you need to conduct risk management tasks before the project begins. Typically, the risk management process has four steps which are;

The planning process group of project risk management knowledge area includes two processes for risk analysis. Qualitative risk analysis is the process of evaluating individual project risks considering their probability of occurrences and impacts. As a result of analysis groups, project risks can be classified into three groups according to their degree of impact which are low, medium, and high.

Basically, risks may impact various elements and tasks of a project. Project schedule, project scope, resource availability, and project goals may be affected as a result of a poorly conducted risk management process.

The probability of risk can be graded using numbers (0 to 1) or percentages (%0 – %100). Using the same scale helps organizations to make comparisons between the same kind of projects and project risks.

Qualitative risk analysis does not only evaluate risks by using a scale, but also group them considering their source and impacts on the project goals and elements.

Types of Analysis

Various types of project requirements are factors on selecting the type of qualitative risk analysis. Availability of time, resources and experience also influence the decision of how to perform project risk assessment. Below are five common types of qualitative risk analysis;

1. Probability/Impact Matrix
2. Bow-Tie Analysis
3. Delphi Technique
4. SWIFT Analysis
5. Pareto Analysis

Main Purpose

Projects often include a large number of risks that have the potential to affect project goals. The main purpose of the qualitative risk analysis is to prioritize risks considering their probability of occurrence and degree of impact. Because it is difficult for a project manager to deal with every single risk and spend resources to mitigate them. Evaluating risks helps team members to develop risk response strategies and use the resources at an optimum level to deal with them.

In addition to that, conducting perform qualitative risk analysis process provides a common understanding among team members while devising the most appropriate risk response strategies.

Conclusion

Many project management professionals don’t know the main reason that they should conduct project risk management processes. In this article, we talked about quantitative and qualitative risk analysis definitions, tools, and examples to help aspirants planning to take the PMP or CAPM Certification Exam. We make a comparison of these risk management concepts that may appear on the PMP and CAPM Exams. We hope that it will be useful for professionals who are seeking to build up a career as a risk manager.

Further Reading