Join Bob McGannon for an in-depth discussion in this video Performing qualitative risk analysis, part of Project Management Foundations: Risk.
Considering the number of potential risks that could occur on any project, every project manager faces a troubling dilemma. How can you manage a project without spending 120% of your time managing all of the possible risks? When will you ever get a chance to perform the numerous other responsibilities you're expected to fulfill? The answer is to perform a qualitative risk analysis to filter and prioritize your risks. With qualitative analysis, you do this based on a quick, high-level assessment of their probability and impact of actually occurring.
I will share the simple steps to use, so you can do this quickly and efficiently. First, you need to determine a straightforward assessment for each risk's impact. One way to keep it simple is to work out what would make something high, medium, and low risk for your project. Would it genuinely blow out your budget, or delay your project substantially? These should be treated as high impacts. A difficult, but manageable situation would constitute medium impacts.
If something would end up being nothing more than a bother and easily manageable, low impacts. Second, you do the same for probability. Just keep it simple. It really doesn't matter if it's not finer in detail than high, medium, and low. So, if you believe the probability is 80% or greater, call the probability high. Over 40%, medium probability. Less than 40%, low probability.
The point of the whole qualitative analysis exercise, is to get a high level ranking for all your risks. It should be quick. It's just a filter to help you work out which risks to spend your time on. Now, the last step. Once you have gone through all the risks, and written down the ratings, sort the results. This will give you a high-level reference for which ones need to be examined further, and which ones can be left for a while. Just make sure you keep this initial master list of risks.
Keep reviewing the list throughout the project life cycle, to make sure all low risks stay rated as low risks. Here are a few tips for ensuring your qualitative risk analysis is efficient and effective. First and foremost, don't make it too complicated. Don't be too fine in your determinations for high, medium, and low risks. Remember, you're just trying to regulate the effort you go through, not chase every risk. You just want to know where to focus your risk management energies.
Second, to help everyone on your project team understand your qualitative analysis, draw up a table like this one, known as the three by three risk matrix. It has probability on one axis, and impact on the other. By recording your findings in this sort of format, you can easily see the risks. Last, after you complete your three by three matrix, look at where your risks lie. If there are a large percentage of medium-medium risks, ensure you didn't put them into that segment by default.
Maybe it's out of habit. The question you need to ask yourself is, "Did I really label the risks qualitatively, "in relation to the others?" Basically, you're going to have to address your high-probability, high-impact risks first. These have to be your priority. Then you'll look at your risks rated high-medium, and medium-high. You may also consider your medium-mediums. For all of your lows, you're probably not going to do much at all, and that's okay.
If you go through the qualitative risk analysis process quickly and efficiently, you are well on your way to making your risk management approach manageable, and well-suited to the needs of your project.
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- Incorporating risk management into your project
- Identifying risk
- Categorizing risks
- Performing qualitative and quantitative risk analysis
- Building a risk-response plan
- Deciding when to execute a risk-response plan<br><br>
- The PMI Registered Education Provider logo is a registered mark of the Project Management Institute, Inc.