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Project Management – Perform Qualitative Risk Analysis
By Timber Chinn, Northwest University

Once project risks are identified, they must be analyzed to determine how likely they are to actually happen and what impact they would have on the project. Qualitative risk analysis means assigning each risk a subjective factor related to how probable it is that the risk will occur and the level of impact that the risk would have if it did occur. The process is easy, quick and inexpensive. More extensive analysis can be accomplished through quantitative analysis which is described later in this book.

All risks are not equal, so qualifying them helps the project manager determine which risks require action, which should be closely monitored, and which can be ignored.For example, a human resources department tasked with hiring 20 highly-skilled employees in a two-month period of time faces several risks. One risk is that the hiring team will not be able to find enough candidates to fill the positions. This risk has a high probability due to a lack of qualified candidates, and high impact because it would affect the project’s objectives. This risk requires action such as expanding the recruitment sources used in the process.

Another risk is that it might take longer than two months to hire some of the candidates. This risk has high probability because candidates might need more than two months to relocate, but only mid-level impact because as long as most employees are hired within the timeframe, the impact of a few coming on later is minimal.This risk should be closely monitored on a case-by-case basis. A third risk is that candidates hired using a recruiter might not like the job and leave, causing the company to lose the recruiter fee. This risk has a low probability because people generally stay for awhile when placed by a recruiter and low impact because a significant number of people would have to leave for this to affect the group. This risk can be ignored because it can be dealt with if it happens. All of these are risks that the project manager must evaluate using the qualitative risk analysis process.

It is wise to involve stakeholders in this process in order to get a well-rounded view of the project’s risks. If only one person is responsible for determining risks and assigning risk factors, the result is a one-sided viewpoint. In addition, including stakeholders in the process helps manage their expectations of the project. However, involving numerous stakeholders can be a two-edged sword. The project does benefit by a well-rounded view of risks, but the quality of the results will depend upon the stakeholders’ prior project experience. For instance, someone with project experience understands that unexpected things always occur during a project. Inexperienced stakeholders may not understand this about projects so their assessment of its risks may be skewed. If the team cannot agree, the project manager must step in and make the decisions required to keep the project moving.

The word “risk” is normally associated with something bad that might happen, but in project work risk can be either negative or positive. In project work, risk is anything that might put the project out of balance with the project plan. An example of a positive risk is when, due to outstanding team performance, the project will be completed ahead of schedule. The project is out of balance because it is not following the projected timeline. It is just as important to identify positive risks as negative risks because they can both have an effect on the project.

A project manager can use several tools to help assign qualitative analysis factors to risks.The most basic is the Probability and Impact Matrix which measures levels of probability that the risk will occur, as well as the impact the risk would have on the project if it did occur.The expanded version of this matrix breaks out both the negative and positive impacts of risks to a project and tracks each separately.Both of these tools are most effective when the impacts are defined by explaining what each level of impact means in comparison to a project’s cost, time, scope and quality.The project team will make better decisions if they all have the same understanding of the meaning of each level of risk.

Northwest University opened to students on October 1, 1934. It is a regionally accredited institution awarding associate, baccalaureate, and master’s degrees.

Note: Implicit permission was given to republish this post, as the article was not copyrighted.

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