What are the Tools and Techniques used for Qualitative Risk Analysis?

Answer 1

Prioritizing risks based on their probability of occurrence and their impact if they do occur is the central goal of qualitative risk analysis. Accordingly, most of the tools and techniques used involve estimating probability and impact.

Risk probability and impact assessment - Risk probability refers to the likelihood that a risk will occur, and impact refers to the effect the risk will have on a project objective if it occurs. The probability for each risk and the impact of each risk on project objectives, such as cost, quality, scope, and time, must be assessed. Note that probability and impact are assessed for each identified risk.

Methods used in making the probability and impact assessment include holding meetings, interviewing, considering expert judgment, and using an information base from previous projects.

A risk with a high probability might have a very low impact, and a risk with a low probability might have a very high impact. To prioritize the risks, you need to look at both probability and impact.

Assessment of the risk data quality - Qualitative risk analysis is performed to analyze the risk data to prioritize risks. However, before you do it, you must examine the risk data for its quality, which is crucial because the credibility of the results of qualitative risk analysis depend upon the quality of the risk data. If the quality of the risk data is found to be unacceptable, you might decide to gather better quality data. The technique to assess the risk data quality involves examining the accuracy, reliability, and integrity of the data and also examining how good that data is relevant to the specific risk and project for which it is being used.

Risk urgency assessment - This is a risk prioritization technique based on time urgency. For example, a risk that is going to occur now is more urgent to address than a risk that might occur a few months from now.

Probability and impact matrix - Risks need to be prioritized for quantitative analysis, response planning, or both. The prioritization can be performed by using a probability and impact matrix; a lookup table that can be used to rate a risk based on where it falls both on the probability scale and on the impact scale.

Look at the table below: RXY, where X and Y are integers that represent risks in the two-dimensional (probability and impact) space.

ProbabilityImpact0.000.050.150.250.350.450.550.650.750.900.20R11R12R13R14R15R16R17R18R190.40R21R22R23R24R25R26R27R28R290.60R31R32R33R34R35R36R37R38R390.80R41R42R43R44R45R46R47R48R49

This is how you read this matrix. R21 has a 40% probability of occurring and will have a 5% impact on the project. Similarly R49 has a 80% probability and will have a 90% impact on the project.

How to calculate the numerical scales for the probability and impact matrix and what they mean depends upon the project and the organization. However, remember the relative meaning: Higher value of a risk on the probability scale means greater likelihood of risk occurrence, and higher value on the impact scale means greater effect on the project objectives.

Each risk is rated (prioritized) according to the probability and the impact value assigned to it separately for each objective. Generally, you can divide the matrix in the table above into three areas; high-priority risks represented by higher numbers, such as R49, medium-priority risks represented by moderate numbers, such as R25, and low-priority risks represented by lower numbers, such as R12. However, each organization has to design its own risk score and risk threshold to guide the risk response plan.

Note that impact can be a threat (a negative effect) or an opportunity (a positive effect). You will have separate matrices for threats and opportunities. Threats in the high-priority area might require priority actions and aggressive responses. Also, you will want to capitalize on those opportunities in the high-priority area, which you can do with relatively little effort. Risks posing threats in the low-priority area might not need any response, but they must be kept on the watch list to ensure that you don't get any unwanted or unexpected surprises towards the end of the project.

Risk categorization - You defined the risk categories during the risk management planning and risk identification processes. Now you can assign the identified risks to those categories. You can also revisit the categorization scheme, such as RBS, that you developed for your project, because now you have more information about risks for the project. Categorizing risks by their causes often helps you develop effective risk responses.

Expert judgment - You may need expert judgment to assess the probability and impact of each risk. To find an expert, look for people who've had experience with similar projects in the not too distant past. While weighing the expert judgment, look for possible biases. Often experts are biased toward their area or idea.