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You are here: Home Blogs Two Techniques for Qualitative Risk Analysis
Thursday, 18 May 2017 00:27

Two Techniques for Qualitative Risk Analysis

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This content is from the TenStep weekly "tips" email dated 2017.17.5
Two Techniques for Qualitative Risk Analysis


After you identify project risks, you need to analyze them to see which ones are important enough to manage. The most common form of analysis is called qualitative risk analysis. This is referred to as “qualitative” since it is a quick approximation of the risk severity and does not reflect the rigor of a detailed, numerical analysis. The overall risk level can be as simple high, medium, or low (or even high/low), depending on the severity of impact and the probability of the event occurring.

There are many techniques for performing qualitative risk analysis using simple tables. Here are two examples that are fairly common.

High, Medium, Low Table

For example, you can use a table like the one below as a starting point. It helps identify high, medium and low level risks by looking at the probability of the occurrence and the overall impact to your project. For instance, a highly likely / high impact event is obviously a high risk. Likewise an event that has a low impact to your project, and has a low likelihood of occurrence anyway, is obviously a low risk. The other combinations fall somewhere within these two extremes.

Severity of Risk Impact / Probability of Risk Occurring

Overall Risk

High negative impact to project / Highly likely to occur

High

High negative impact to project / Medium likely to occur

High

High negative impact to project / Not likely to occur

Medium/Low

Medium negative impact to project / Highly likely to occur

Medium

Medium negative impact to project / Medium likely to occur

Medium/Low

Medium negative impact to project / Not likely to occur

Low

Low negative impact to project / Highly likely to occur

Low

Low negative impact to project / Medium likely to occur

Low

Low negative impact to project / Not likely to occur

Low

Ignore, Caution, Respond Chart

A second technique uses a simple table that provides guidance on whether you should respond to a risk.

Probability ->

Impact




Low




Medium




High

Low

Ignore

Ignore

Caution

Medium

Ignore

Respond

Response

High

Caution

Response

Response




The green boxes represent a combination of probability and impact that you may safely be able to ignore. The red boxes represent combinations that need to be managed. The yellow box represent risks that should be evaluated individually to determine if you should respond or not.

Summary

These are examples of techniques used to analyze project risks. There are many other techniques as well. The point is that qualitative risk analysis relies on subjectivity to determine whether a risk is worth managing or not. For the vast majority of projects this subjective decision is good enough.
At TenStep we are dedicated to helping organizations achieve their goals and strategies through the successful execution of critical business projects. We provide training, consulting and products for organizations to help them set up an environment where projects are successful. This includes help with strategic planning, portfolio management, program / project management, Project Management Offices (PMOs) and project lifecycles. For more information, visit www.TenStep.com or contact us at This email address is being protected from spambots. You need JavaScript enabled to view it.
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