Have you ever endured a project meeting where you spent hours evaluating risks? Afterward, team members walked down the hall saying, “What a waste of time! Now I can get back to the real work.” Today, let's discuss the use of qualitative risk analysis to get you back on track. Show What causes this frustration? First, the evaluation process may not fit the project – too complex for simple projects or deficient for large, complex projects. Second, the process may not fit the maturity level of the project team. Third, team members view the process as burdensome with little value. Risk evaluation is the process to determine the significance of each risk. There are two ways to evaluate risks:
You cannot respond to all risks, neither should you. Prioritization is a way to deal with competing demands. This aids in determining where you will spend your limited time and effort. We evaluate in order:
How to Perform Qualitative Risk AnalysisLet’s look at two qualitative risk evaluation methods: 1. the KISS Method, and 2. the Probability/Impact Assessment. Be sure to specify your risk analysis technique(s) in your Risk Management Plan as you assess your risks, capture and maintain your risk ratings in your risk register. Check with your organization to determine whether there is a definition of risk scales. If not, define the criteria for your scale.
Qualitative Risk Analysis CourseThis FREE course has been developed to help individuals who are preparing for the PMI-RMP exam, individuals who are preparing for the project risk management portion of the PMP exam, and those who wish to apply qualitative risk analysis to prioritize project risks quickly and improve project success. I use the KISS (Keep It Super Simple) Method on smaller projects and with teams that lack maturity in assessing risks. This one-dimensional technique involves rating risks as:
This scale allows greater discrimination than the commonly used Low, Medium, and High scale. 2. Probability/Impact AssessmentI normally use this technique with larger, more complex projects and with teams that have experience with risk assessments. This two-dimensional technique is used to rate probability and impact. Probability is the likelihood that a risk will occur. The impact is the consequence or effect of the risk, normally associated with impact to schedule, cost, scope, and quality. Rate probability and impact using a scale such as 1 to 10.
Once you have rated each risk, calculate the Risk Score as Probability x Impact. I sort my risks in descending order with the Risk Score as the primary sort. Risks Analysis in Program ManagementThe Probability/Impact Assessment also helps in programs. I total the risk scores within each project to calculate the Project Risk Score and compare the scores between projects. This helps me understand which projects have the greatest risk exposure and where I need the most skilled people. Qualitative risk analysis can help identify potential project risks. Here's how to make one. Image: Casper1774Studio, Getty Images/iStockphoto Effectively addressing risks means at the start of each project every project manager should develop and implement a risk management strategy, plan, and tools. But being able to decide which risks should be addressed first is always a challenge. Qualitative risk analysis is a commonly used tool that can help with this task. SEE: Scrum meetings: The do’s and don’ts (free PDF) (TechRepublic) What is qualitative risk analysis?If you’re new to project management, qualitative risk analysis is a risk analysis technique that prioritizes project risks and assigns a rating based on the likelihood a risk can become a real problem and the potential impact on your project. For example, a qualitative analysis may have identified ten risks, but not all of them will be weighted as a top priority. There may be only four risks that are top priorities if they pose a significant impact and are likely to occur, while two other risks only pose a moderate threat, and the other three are a low threat. These five remaining risks would be assigned a medium to low priority. Qualitative risk analysis benefitsQualitative analysis is often based on expert judgment and is a relatively straight-forward technique that can be applied to many types of projects. It’s easy to implement and explain to stakeholders. This lightweight technique doesn’t require any substantial technical knowledge, and it can be quickly and easily adjusted as circumstances and risks change. SEE: How to deliver bad news to project stakeholders (free PDF) (TechRepublic) 5 Step process to perform a qualitative risk analysisPerforming a qualitative risk analysis isn’t particularly onerous, but it takes focus and attention to detail. It requires a project manager or risk manager to follow this process carefully.
The qualitative risk matrix in Figure A shows high-priority risks in red and the lowest in green. Figure A Qualitative tools and techniquesExpert judgment, data gathering, and data analysis are just some of the qualitative risk analysis tools teams can use. Each has its benefits and drawbacks. Expert judgment provides insight based on similar experiences and is somewhat subjective, while data gathering provides information from stakeholder interviews. Data analysis involves risk probability (likelihood) and impact, as seen above. Performing a thorough qualitative risk analysis to isolate and prioritize risks, develop strategies to address, monitor, and re-evaluate them, provides your team the confidence. |