Risk Management Analysis

Risk Analysis

• Risk analysis is the process of evaluating identified risks to determine their likelihood of occurring and their potential impact on project objectives.

Purpose

• Prioritization: Focus on the most significant risks.
• Decision-Making: Inform decisions about risk responses.
• Resource Allocation: Allocate resources efficiently.
• Communication: Facilitate clear communication with stakeholders.

Qualitative Risk Analysis

• Describing risks: A process of prioritizing risks for further analysis based on probability of occurrence and impact using descriptive scales (e.g., High, Medium, Low).
• Focus: Subjective assessment based on expert judgment, experience, and readily available data.
• Key considerations when determining risk data quality include accuracy, reliability, completeness, and timeliness of data.

Probability and Impact

• Probability: The likelihood that a risk event will occur, using terms like Rare, Unlikely, Possible, Likely, and Almost Certain.

tImpac: The effect that a risk event will have on project objectives if it happens, with terms like Negligible, Minor, Moderate, Major, Critical, Catastrophic.

Probability/Impact Matrix

• A matrix combines probability and impact of risks to assign a risk score or categorize risks.
• The matrix is used to rank risks based on their probability and impact scores.

Risk Data Quality Assessment - Evaluating the reliability and accuracy of the data used for risk analysis.

Why Risk Data Quality Assessment is important?

Poor quality risk can lead to:

• Incorrect risk prioritization
• Ineffective risk responses
• Wasted resources

Unrealistic risk assessments

Factors of Risk Data Quality Assessment

• Data Accuracy
• Data Reliability
• Data Completeness
• Data Timeliness

Other Qualitative Techniques

• Judgment - Relying on the knowledge and experience of experts to assess risks
• Brainstorming- A group technique for generating a list of potential risks.
• SWOT Analysis- Identifying risks from weaknesses and threats in a SWOT analysis.

Quantitative Risk Analysis

• Measuring risk: A process of numerically analyzing the probability and impact of risks to determine their overall effect on project objectives.
• Focus: Objective measurement using numerical data and statistical techniques.

Expected Monetary Value (EMV): The average outcome of a risk event, calculated by multiplying the probability of the event by its monetary value. Formula: EMV = Probability * Impact (in monetary terms)

Probability Distributions: Mathematical functions that describe the likelihood of different outcomes, representing uncertainty more realistically (e.g., Triangular, Normal, Uniform, Beta Distributions).

Sensitivity Analysis: A technique determining the most significant risks affecting the project.

Monte Carlo Simulation: A technique simulating the effect of multiple risks on project outcomes using computer-generated random numbers.

Decision Tree Analysis: A graphical representation of decision options and their consequences.

Inputs and Outputs of Risk Analysis

Inputs to Risk Analysis

• Risk Register: The primary input, containing identified risks and descriptions.
• Project Scope Statement: Defines the project boundaries for risk analysis.
• Project Management Plan: Provides context and information.
• Organizational Process Assets: Policies, procedures, and historical data.

Outputs:

• Prioritized Risk List: Risks ranked by their overall risk score or category.
• Risk Report: A document summarizing the results of risk analysis, including risk descriptions, probabilities, impacts, and response recommendations.

This quiz explores the principles of risk analysis and assessment in project management. Students will learn to differentiate between qualitative and quantitative risk assessments, and apply relevant tools and techniques. Engage with scenarios to identify and prioritize risks effectively.