In his article in ProjectRiskCoach.com, Harry Hall describes the two methods to evaluate risks using qualitative risk analysis. Before that however, he explains what risk evaluation is, and why prioritizing project risks is important.
What is Risk Evaluation?
Risk evaluation is the process used to determine the significance of risks. There are two ways to evaluate risks:
- Qualitative: Qualitative analysis, such as rating probability and impact should always be carried out. This lets you quickly prioritize and rank risks.
- Quantitative: This method requires more time and is not always carried out. However, this method provides more data which can aid decision making.
Why Evaluate or Prioritize Project Risks?
Prioritizing risks can help you deal with competing demands, which can then help you allocate time and resources according to the more pressing or important risks.
As such, evaluation is carried out to:
- To have the greatest impact
- So as to respond wisely and appropriately
- To suitably assign resources
How to Perform Qualitative Risk Analysis
There are two qualitative risk evaluation methods:
- The KISS method
- The Probability/Impact method
The KISS Method
This method can be applied on smaller projects, and with teams which lack maturity in assessing risks. This is a one-dimensional technique and involves assigning the following ratings to risks:
- Very Low
- Very High
This scale allows greater discrimination than the commonly used Low, Medium, and High scale.
The Probability/Impact Method
This technique can be applied to larger, more complex projects, and with teams which are more experienced in risk assessments. This is a two-dimensional technique and is used to rate probability and impact. Here, probability is the likelihood that a risk will occur, while impact is the consequence or effect of the risk. In this method, probability and impact are each rated on a scale of 1 to 10. The risk score is then determined using the ‘Probability X Impact’ formula.
This method helps in assessing risks for programs and can help arrive at projects which have the greatest risk exposure, and which need the most skilled people.
Click on the following link to view the original article in full: https://projectriskcoach.com/evaluating-risks-using-qualitative-risk-analysis/