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Quantitative Risk Analysis
January 22, 2009 | Author: PM Hut | Filed under: Project Management Definitions, Risk Management, Risk Quantification & Analysis
Quantitative Risk Analysis
By Joseph Phillips
Quantitative risk analysis requires the project manager; the project team; and, in some cases, business analysts and subject matter experts to quantify the risk exposure. This can be accomplished in a bunch of different ways:
- Interviews with stakeholders. Discussing the risk with stakeholders can help you to capture the true risk impact.
- Prototypes. A prototype can test the project’s deliverable before it goes into production. Obviously, this isn’t always feasible with IT projects, construction, and other scenarios where there’s no such thing as a pristine environment.
- Simulations. Simulations and experiments are ideal for “what if” scenarios. With scenarios, you can monkey around with conditions, delays, and sequencing of events to capture the true risk of conditions within your project.
- Expert judgment. Expert judgment is one of the best tools in project management. It means that the project manager is relying on someone with more experience to help make the best decision.
- Monte Carlo simulations. Monte Carlo, named after the world-famous city for games of chance (really, it is) allows the project manager to enter all of the different conditions into a computer program to see the most probable outcome of events.
Quantitative risk analysis can also use a risk rating matrix, but it usually uses a cardinal scale rather than ordinal. A cardinal scale is simply hard numbers based on your analysis.
Joseph Phillips is the author of five books on project management and is a, PMI Project Management Professional, a CompTIA certified Project Professional, and a Certified Technical Trainer. For more information about Project Management Training, please visit Project Seminars.
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[...] Within your project, you have to determine which of these risks deserve additional analysis. Typically you’d say the risks with a medium score or higher should be taken seriously and are promoted to quantitative risk analysis. [...]