4 Things You Need to Know About Qualitative Risk Analysis
Risks ruin projects. Because when left unchecked, they turn a successful project into a dead project.
That’s expenses, cost, training and time burned away.
- To eliminate them before they explode
- To create a plan of action to handle the explosion
Qualitative Risk Analysis is an important method to identify risks. With it, we can prevent the impact of project explosions.
1. What is Qualitative Risk Analysis?
Project risks — issues or complications that may lead to project failure — must be identified. It can then be placed in the “risk register”. At this point, it’s time to do a qualitative risk analysis. Regardless of project size, it’s recommended to always do qualitative risk analysis.
You’re measuring the amount of risk for each identified problem in a project. Plus the probability of these risks occurring and how much it’ll impact the project. High risks can put the project in a vulnerable state.
With each risk assessed in probability and impact, you’ll decide which should be prioritized first.
For example, if funding for a project is cut, that’ll bring disastrous results (high risk, high impact). But if one employee from your team quits, the project can continue (high risk, low impact).
But lose funding and the entire project is lost. This becomes priority number one.
For identified risks you must do a Plan Risk Response.
2. When Should You Do Qualitative Risk Analysis?
Qualitative Risk Analysis is necessary after risk factors have been identified. While it’s counterpart, quantitative risk analysis, is optional (it’s not necessary for small projects), qualitative risk analysis should be performed for every project — no matter the size, deadline, or quality.
The reason being that qualitative risk analysis examines every single risk that could lead to project disaster. It prepares the team for “worst case scenarios” and how to avoid or handle the risks if they do happen.
Quantitative risk analysis examines the overall risk of a project, after individual risks (qualitative) has been conducted. The two work well together, especially for large scale projects. But qualitative risk analysis works for any and all projects.
3. Must You Do Qualitative and Quantitative Risk analysis together?
No. Quantitative risk analysis is time-consuming.
It uses the results from qualitative risk analysis to provide the overall project risk. When your project is expected to take several months to complete or will be using a heavy amount of funding, it may be best to acknowledge the overall risk of the project.
But for small or day-to-day projects, it will be a misuse of time to conduct both analyses.
You need a risk prevention or adjusted plan, though, for your projects. Going in blind to the risks ensures project failure. Qualitative risk analysis is less time consuming while helping you “Risk Proof” your projects.
Again, do quantitative risk analysis for big projects after completing qualitative risk analysis.
4. How Is Qualitative Risk Analysis Measured?
The risk scale is textual. You calculate risk in low, medium, or high probability. It also can be color coded, numeric, or a combination of all.
In this respect, the measurement is more detailed than with quantitative risk analysis. Quantitative measures in monetary (funding, expenses, costs) and schedule (days, weeks, months and years).
There you go!
Now you have a better understanding of qualitative risk analysis, why to use it, and when (again, always!).
A properly conducted qualitative risk analysis highlights potential issues in a project that can or will limit progress. With qualitative risk analysis, you’ll note the complexity of the risk, probability, and impact to create a proper plan of action.