Question

Qualitative risks are typically categorized by a group of experts to determine the probability and the impact to project objectives. In the example below, consider the next steps that should be taken as project manager to assemble a group of experts to participate. Who would you select and why?

Project Management Body of Knowledge (PMBOK) defines risks as “an uncertain event or condition, that if it occurs, has a positive or negative effect on one or more project objectives” (ProjectRiskCoach, n.d.). Risk is inevitable no matter the project. How a PM handles said risk can make or break a project. Two types of risk analysis one can perform to mitigate risk are qualitative risk and quantitative risk. In general, a PM should always perform a qualitative risk assessment during the planning stage of a project. Qualitative risk analysis is usually a quicker analysis compared the quantitative assessment because it is more subjective (ProjectRiskCoach, n.d.). A qualitative risk analysis identifies risk on a pre-defined scale and the likelihood it might occur, typically as a percent (Goodrich, n.d.). For example, the likelihood of delivering the project over budget is about 30%. Furthermore, qualitative risk analysis will include a categorization of the risk, such as source-base or fact-base (Goodrich, n.d.). In contrast, quantitative risk analysis is a more robust analysis. As noted, it is more time consuming and usually requires additional software to complete accurately and efficiently (Goodrich, n.d.). Interestingly, one typically does a qualitative risk analysis before proceeding with a quantitative risk assessment. Furthermore, a good quantitative risk analysis needs, “high-quality data, a well-developed project model, and a prioritized lists of project risks” (Goodrich, n.d.). It is clear that quantitative risk assessment is the better of the two approaches but sometimes only a qualitative assessment is necessary. For example at my company, we monitor the level of engagement of some of the sites we work with based on the work that is completed month of over month. As we are moving towards a particular deliverable we hope to see the level of engagement go up. We use a red, yellow, green rating scale based on the metrics. If a group identified as red, or high risk, we find ways to address the problem before it becomes a serious issue or significant delay. Similarly to monitoring site engagement, we also monitor colleague engagement. My team is responsible for reviewing data on a frequent basis and if the reviewed data metrics are below a certain threshold then we are exposed to risk. A client could request at any moment to close the database or regulatory authorities might request access to the data. Therefore, we closely watch these metrics to ensure we are mitigating any problem before they become apparent and require significant resources to address. Upon review, it is evident that my company and their PM do a lot of qualitative risk analysis to identify risk and proactively identify solutions.

Answer 1

Comparison of quantitative and qualitative risk analysis methodologies requires an understanding that they are not mutually exclusive and can be used in conjunction with the calculation of specific risk areas within a project. The qualitative approach is simplest and takes as little time as possible. This type of analysis starts with subjective scales designed to record the impact of a risk and the likelihood of occurrence. Many project managers argue for the use of higher granularity, such as the substitution of "big" with the digital spectrum to control the subjectivity of these scales. To order to create a risk ranking, both risk likelihood and risk effects are multiplied. The score and index helps the project team to prioritize risks; focus on people who pose a larger risk to the project; and track less important ones lightly.

A quantitative approach can be measured further by concentrating on the cumulative impact of risk on multiple project limitations. For instance, a delayed product delivery can have a negative impact on both the project quantity and cost. The cumulative effect is calculated using several methods by this method. For instance, a decision tree serves as a path-map allowing project teams to see how a number of events such as a project schedule will affect different variables. In contrast, a sensitivity analysis tries to measure the elasticity of factor acquires an understanding of how much variance in elements like quality or cost can be introduced, without significantly affecting the overall deliverable. In general, the quantification method seeks to manage the risk by deepening an understanding and highlighting specific areas of concern.

During a recent project, qualitative risk management approaches were used when the initial deadline for the phased rollout was delayed, and when a vendor received comparable results. During the period from April to July, a five-stage implementation was planned for this project. The system development schedule was in progress, but user training was difficult; this led to changes requiring the timeline to be adjusted and the use of the previous charge capture system extended. The two major risks found were the wait for business activities to benefit from the analysis tools in the new platform and to increase the project development capital. As the two systems were not mutually exclusive (both can be used to generate costs at the same time), the risk was insufficient to justify a quantitative analysis.

The project team then understood the implementation dates and anticipated that users would switch to the new platform after training. Another example of quality risk management was used earlier in this project in dealing with a vendor contracted to code a custom interface between the system and its platform. For the old system, a similar interface on a similar schedule was coded. Furthermore, a risk mitigation plan was developed, which could be implemented if the interface is not ready to be applied. The overall risk for both items was not large, and the team could spend minimum time in risk management using its qualitative method through the use of a risk mitigation plan.

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