BSBPMG508A Manage Project Risk 11.3 Perform Qualitative Risk Analysis Adapted from PMBOK 4 th Edition InitiationPlanning ExecutionClose Monitor Control The process of prioritising risks by assessing and combining their probability of occurrence and the consequences of their impacts Project performance can be improved by focussing limited resources on the high priority risks Qualitative risk analysis is the most common, fastest and most cost effective means of establishing risk priorities and planning risk responses It is critical to establish definitions of the levels of probability and impact so as to reduce the influence of bias Occurs during Planning

BSBPMG508A Manage Project Risk 11.3 Perform Qualitative Risk Analysis Inputs to Qualitative Risk Analysis Draft Risk Register Risk Management Plan Project Scope Statement Organisational Process Assets - –Risk management standards –Risk management policies and procedures –Risk categories and definitions –Standard templates –Lessons learned from previous projects –Risk databases and checklists Adapted from PMBOK 4 th Edition InitiationPlanning ExecutionClose Monitor Control

BSBPMG508A Manage Project Risk 11.3 Perform Qualitative Risk Analysis Tools and techniques for qualitative risk analysis include - Risk Categorisation Risk Data Quality Assessment Risk Probability & Impact Assessment Probability & Impact Matrix Expert Judgement Risk Urgency Assessment

BSBPMG508A Manage Project Risk Probability and Impact Assessment Likelihood = Probability Consequences = Impact Qualitative Risk Analysis involves the estimation of the likelihood and consequences of each risk Quantitative Risk Analysis involves estimating the measurable impact on project objectives, specifically – Cost, Time, Scope and Quality

BSBPMG508A Manage Project Risk Basic Risk Analysis Matrix Determines - How risks are treated How closely they are monitored How quickly they must be resolved if they occur For example Risk Management Guidelines – Companion to AS 4360:2004 Medium Risk High Risk Medium Risk Low Risk Consequence Likelihood Probable Improbable MinorMajor Low Risk GreenBusiness as Usual Acceptance Medium Risk AmberHeightened Action Monitor Closely High Risk RedImmediate Action Mitigate or Avoid

BSBPMG508A Manage Project Risk Likelihood and Consequences Simple Likelihood Scale Simple Consequences Scale RatingDefinitionScale Almost CertainWill definitely occur or will occur on an annual cycle5 LikelySimilar events have been experience several times in the past 20 years4 PossibleWill occur once every 20 years3 UnlikelyOccurs from time to time2 RareOccurrence is possible but highly unlikely1 Adapted from Risk Management Guidelines – Companion to AS 4360:2004 RatingDefinitionScale SevereMost objectives cannot be met5 MajorSome important objectives cannot be met4 ModerateSome objectives impacted but may still be met 3 MinorMinor effects that can be remedied2 NegligibleAlmost no impact on objectives1

BSBPMG508A Manage Project Risk Risk Rating Matrix and Risk Urgency RatingSevereMajorModerateMinorNegligible Almost Certain Red 25 Red 20 Red 15 Amber 10 Green 5 LikelyRed 20 Red 16 Amber 12 Amber 8 Green 4 PossibleRed 15 Amber 12 Amber 9 Green 6 Green 3 UnlikelyAmber 10 Amber 8 Green 6 Green 4 Green 2 RareGreen 5 Green 4 Green 3 Green 2 Green 1 Put your likelihood and consequence ratings together and what do you get? Risk Rating = Likelihood x Consequences Risk Urgency = RED, GREEN, AMBER

BSBPMG508A Manage Project Risk Risk Categorisation – Breakdown Structure Adaptations and additions to the example in the PMBOK Adapted from PMBoK Guide – Fourth Edition

BSBPMG508A Manage Project Risk 11.3 Perform Qualitative Risk Analysis Outputs of this process include – Risk Register Updates –Likelihood and Impacts Prioritised List of Project Risks –Risks requiring response in near term –Risks requiring additional analysis and response planning Risks grouped by categories Root cause analysis Watch lists of low priority risks Trend analysis Adapted from PMBOK 4 th Edition InitiationPlanning ExecutionClose Monitor Control

BSBPMG508A Manage Project Risk Risk ID Risk Category Risk DescriptionRisk Owner LikelihoodImpactRisk Rating Management /Mitigation Strategies Residual Likelihood Residual Impact Residual Rating StatusPriority Impact Consequences of the risk occurring Impacts on or more project objectives Includes scope, time, cost & quality Has both a number scale and definition Requires judgement and prediction More accurate if can leverage lesson learnt Inclusions in Risk Register During Analysis Adapted from PMBOK 4 th Edition Management/Mitigation Strategies Avoid – remove entirely Mitigate – reduce likelihood or impact Accept – normally for LOW risks Transfer – to another party, eg contract or outsource Likelihood Probability of the risk occurring Typically defined in a risk rating matrix Has both a number scale and definition Requires judgement and prediction More accurate if can leverage lessons learnt Risk Rating Combines Likelihood and Impact Normally multiplied together Enables overall prioritisation of risks

BSBPMG508A Manage Project Risk Risk ID Risk Category Risk DescriptionRisk Owner LikelihoodImpactRisk Rating Management /Mitigation Strategies Residual Likelihood Residual Impact Residual Rating StatusPriority Residual Rating Revised risk rating Most important for risk monitoring Inclusions in Risk Register During Analysis Adapted from PMBOK 4 th Edition Residual Likelihood Probability of risk occurring after management or mitigation actions Residual Impact Impact of risk occurring after management or mitigation actions Status Typically RED, GREEN, AMBER Priority Typically HIGH. MEDIUM. LOW