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Saturday, September 15, 2012

Overview of Tools & Techniques used in Qualitative Risk Analysis

In the previous section, we covered all the inputs we will need in order to effectively perform the Qualitative Risk Analysis step of Risk Management in your project. The next logical step is to apply some tools & techniques on these input in order to kick-start our Risk Analysis activities.

There are a total of 6 tools & techniques that we are going to learn in this section. They are:

1. Risk Probability & Impact Assessment
2. Probability & Impact Matrix
3. Risk Data Quality Assessment
4. Risk Categorization
5. Risk Urgency Assessment
6. Expert Judgment

Not all projects require us to use all of these tools or techniques. Projects vary in type, length, circumstances etc. Some tools that are very useful for a certain kind of project may not be so useful for a different kind of project. So, it is up to us to decide which tools are best suited for our project’s needs and utilize them effectively.

Do you remember that all risks are analyzed, assessed and prioritized based on the Stakeholder Risk Tolerance levels, probability & impact definitions etc that were defined in the Risk Management Plan? If you don’t, I strongly suggest you revisit the chapter titled “Creating the Risk Management Plan” and refresh your memory on the same.

Let me remind you that this chapter is just an overview of the tools & techniques we are going to use in Qualitative Risk Analysis. We will be taking a detailed look at each of these tools/techniques one by one in the following chapters in this section.

Prev: Inputs used in Qualitative Risk Analysis

Next: Risk Probability & Impact Assessment

Qualitative Risk Analysis - Inputs

In the previous chapter, we saw an overview of the Qualitative Risk Analysis process. As with any process, this one too takes some inputs, applies some tools & techniques and generates an output. As a first step, in this chapter, we are going to take a detailed look at all the inputs that this Qualitative Risk Analysis process uses.

To start off – Inputs here refers to all the documents and other sources of information that we will need to conduct an effective Qualitative Analysis. This process uses a total of 4 inputs. They are:

1. Risk Register
2. Risk Management Plan
3. Project Scope Statement
4. Organizational Process Assets

Let us take a detailed look at each of these input items.

Risk Register:

Remember the Risk Register we created just a couple of sections ago? This register is going to contain the most up-to-date information reg. all the risks that might affect our project. As of now this document is going to contain:
a. List of identified risks including their impact, consequences, root causes etc.
b. List of potential responses. This may not be available for all the risks but could be present for a few

The Risk Register is one of the key inputs to this process. Let’s face it, what kind of risk analysis can anyone do when they don’t have the list of risks that they have to analyze?

As suggested in the chapter titled Contents of the Risk Register the Risk Register is created as the output of the Identify risks process and is passed on as input to the next process in the risk management cycle for further updates. This qualitative analysis process if the first step after risk identification and the risk register will be updated in this process.

Risk Management Plan:

The Risk Management plan as you might have seen contains a truckload of information that will be useful in risk management & especially risk analysis. If you do not remember all of the contents then I suggest you revisit the chapter titled “Contents of the Risk Management Plan” to refresh your memory.

Of all the items that are present in a risk management plan, the qualitative risk analysis process uses the following:
a. Roles & Responsibilities
b. Budgeting Information
c. Timing Information
d. Risk Categories
e. Definition of Risk Probability & Impact
f. Risk Probability and Impact matrix
g. Stakeholder Risk Tolerance

As you might have noticed in the chapter titled “Contents of the Risk Management Plan” the risk management plan contains a lot more information than what is listed above. This is because we have listed down only those elements in the risk management plan that will be useful for us from the qualitative risk analysis process perspective.

The Risk Management Plan is yet another key input to this qualitative analysis process. Without details like who is going to do what, how much budget we have for this task, how much time we have for this task, the definition of risk impact & probability as per the project, the stakeholder risk tolerance etc. there is no way we can conduct an efficient analysis.

Project Scope Statement:

The project scope statement is another critical input component to this qualitative analysis process. This document is going to contain details about the projects deliverables and explains as to what the project is going to accomplish along with details like the project constraints, assumptions and acceptance criteria.

It also suggests if this project is going to create something new. Typically a project that is creating something new or is using something new (like a new technology) is more prone to risk as the same has never been done before in your organization. If what we are doing in our project is similar to any of the previous project executed by the project manager or the organization, things are a lot easier and the chances/number of risks come down too.

Organizational Process Assets

Organizational process assets refer to any and all process related assets like plans, policies, procedures and guidelines. Any document created by the organization for the benefit of the others in the same organization can be considered an Organizational Process Asset.

For this Qualitative Risk Analysis process the assets we can use are:
a. Lessons Learned document from previous similar projects
b. Risk Registers & sample response plans from previous similar projects

By taking into consideration how previous projects handled their risks, we can get a fair idea of how risks need to be handled in our project in the best possible way.

Prev: Introduction to Qualitative Risk Analysis

Next: Tools and techniques used in Qualitative analysis - an overview

Qualitative Risk Analysis – An Introduction

The Qualitative Risk Analysis process is the 3rd process within the Project Risk Management Knowledge Area in the PMBOK Guide. This chapter is just an introduction to this topic. We will be covering this topic in great detail in the subsequent chapters.

We have completed Risk Identification and have created the risk register which contains all the information we know about the risks we have identified so far. At this point the risk register contains only the basic details like what the risk is plus any potential response that you think might be feasible. But, apart from this information the register is empty. So, in this stage, we are going to analyze these identified risks and add as much information as possible about those risks into the risk register.

Purpose of Qualitative Risk Analysis:

The purpose of this process is to prioritize risks in order to determine which risks require additional analysis. This helps the risk management team to focus on the higher priority risks.

The Qualitative Risk Analysis process asks questions like:
a. What is the probability of this risk occurring?
b. What is the impact to the project objectives, if this risk occurs?
c. How much time do we have, to respond to this risk?
d. Where should we spend our effort?
e. Etc.

The Qualitative Risk Analysis process uses the definition of Probability & Impact we set in the Risk Management Plan. Also, we will be using the Risk Probability & Impact Matrix. The purpose of using these set values is to reduce bias on how risks are assessed and ensure a consistent analysis of all risks. We covered this in one of our earlier chapters titled “Contents of the Risk Management Plan”. You can revisit that chapter to refresh your memory about risk probability and impact.

At the end of qualitative risk analysis, we may feel the need to further analyze a few of the selected high priority risks. These risks will be further analyzed in the quantitative risk analysis process. The image below summarizes the steps in qualitative risk analysis:

Prev: Section Summary - Overview of Risk Analysis

Next: Inputs - Qualitative Risk Analysis

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