Risk management and identification don’t operate in a vacuum. You are constantly throughout the project, searching for new risks and monitoring current ones. There are many different risk analyses. The two risk analysis project management processes are qualitative risk analysis and quantitative risk analysis. Many people including seasoned pros are confused by the two. Don’t be! Here are their definitions and when you should use these two.
The Project Management Body of Knowledge (PMBOK) defines qualitative risk analysis as ‘the process of prioritizing individual project risks for further analysis or action by assessing their probability of occurrence and impact as well as other characteristics.’ The key benefit of this process is that it focuses efforts on high-priority risks.
PMBOK defines quantitative risk analysis as ‘the process of numerically analyzing the combined effect of identified individual project risks and other sources of uncertainty on overall project objectives.’ The key benefit of the process is that it quantifies overall project risk exposure. This process is not required for every project.
In risk management, you always do qualitative risk analysis. Most of the time, that’s okay. However, if the high-priority risks that you’ve identified are becoming bigger, then you will have to do quantitative risk analysis. Quantitative risk analysis costs more because it is more involved and you are doing root cause analysis.
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