Qualitative Risk Assessment
by
Hulett & Associates, LLC
Project Management Consultants
Qualitative risk assessment separates risks into categories for better project management.
High risks
should be resolved in the baseline plan. The best managers should be assigned. Additional resources should be applied. With some of these risks, project descoping might be considered.Moderate risk
can be addressed with plans that balance the cost of risk management with the risk-adjusted impact on the project. Contingency plans can be applied to these risks.Low risks
can often be left to the project team to address as they arise during the project.
Risk assessment is sometimes sufficient to guide project management actions. For complex, risky projects, risk assessment can be a beginning, leading to a full-on quantitative analysis of cost or schedule risks as described elsewhere in this website.
Risk assessment takes into account both the likelihood of a risk occurring and its impact on project objectives if it does occur. There are several ways to measure the likelihood and impact of a risk event. The best approach scales these two characteristics between 0.0 and 1.0.
Likelihood is usually measured between 0.0 (no likelihood) and 1.0 (certainty). While this seems to be natural, questions can be developed that lead to answers that indicate the level of likelihood. One example of some questions to determine the likelihood of technical risk is shown below:
The impact of a risk, should it occur, will be to jeopardize the project's ability to succeed at one of its objectives. Typical objectives include cost, schedule and performance. It is not entirely natural to judge these impacts on a scale of 0.0 to 1.0, so some questions and their associated ratings are developed. Take the impact on performance:
Another set of questions might lead to rating the impact on the schedule objective:
Probability and impact of a risk are combined in a P-I matrix to rank the risks into classes. There are several ways to do this, but one common approach is the one suggested by Dr. Harold Kerzner and used by project offices in several government agencies and corporations. It is shown below, with red, yellow and green designations of high, moderate and low risks.
Any risk can be classified as high, moderate or low depending on its position in the P-I matrix.
For more information:
David T. Hulett, Ph.D.
e-mail: info@projectrisk.com
URL: www.projectrisk.com
Phone: (310) 476-7699
Cell: (310) 283-3527
FAX: (310) 472-8846
12233 Shetland Lane, Los Angeles, CA 90049
