Management & Development of Complex Projects Course Code MS Project Management Perform Qualitative Risk Analysis Lecture # 25

In previous Lecture, we have discussed about  Identify Risk  Identify & response risk  Early identification  Iterative identification  Emergent identification  Scope risk  Schedule risk  Money risk  Resources risk  Typical risks in construction Summary of Previous Lecture

Perform Qualitative Risk Analysis Perform Qualitative Risk Analysis is the process of prioritizing risks for further analysis or action by assessing and combining their probability of occurrence and impact

Assessment of Risk Assessing individual risks using qualitative risk analysis evaluates the probability that each risk will occur and the effect of each individual risk on the project objectives. As such it does not directly address the overall risk to project objectives that results from the combined effect of all risks and their potential interactions with each other

Source Of Risk One step in the analysis is to categorize risks according to their sources or causes. If several risks arise from a common source, sometimes called a root cause, risk responses may be more effective when they focus on addressing this root cause.

Application of Qualitative Risk Analysis The methods of qualitative risk analysis are applied to the list of risks created or updated by the Identify Risks process to provide project management with the characteristics of the risks that have the most influence (positive or negative) on achieving the project’s objectives.

Usage of Perform Qualitative Risk Analysis Perform Qualitative Risk Analysis is usually a rapid and cost-effective means of establishing priorities for Plan Risk Responses and lays the foundation for Perform Quantitative Risk Analysis, if required.

Critical Success Factors for Perform Qualitative Risk Analysis Several factors that lead to successful qualitative risk analysis are  Use Agreed-Upon Approach  Use Agreed-Upon Definitions of Risk Terms  Collect High-Quality Information about Risks  Perform Iterative Qualitative Risk Analysis

Agreed Upon Approach The process is based on an agreed-upon approach to this assessment that is applied across all of the identified risks in any project. By the nature of project risk, all risks may be assessed according to probability of occurrence and impact on individual objectives should the risk occur.

Agreed Upon Definitions The risk assessment should be based on agreed-upon definitions of important terms, and those definitions should be used consistently when assessing each risk.

Iteration of Qualitative Analysis The success of qualitative risk analysis is enhanced if the process is used periodically throughout the project. It is impossible to know in advance all the risks that may occur in a project, therefore the Identify Risks and Perform Qualitative Analysis processes should be repeated periodically for individual risks.

Qualitative Risk Analysis Process

Risk Characteristics Qualitative risk analysis tools provide ways to distinguish those risks that are important for response or further analysis from those that are less important.

Data Collection Assessment of individual risks is based on information collected about them. Therefore, data collection and evaluation tools, including interviews, workshops, and references to databases of prior projects, require management support and attention.

Prioritizing Risks based by effect on specific objective Some tools permit distinguishing a risk’s priority in terms of the affected objective. This capability provides a list of risks that are important for any specific objective of interest to management.

Prioritizing Risks based by effect on Overall Project There are reasons for constructing a measure of a specific risk’s importance to the entire project as contrasted with its importance to specific objectives. A common reason is for ease of communication with management and other stakeholders.

Categorizing Risks Categorizing risks appropriately may lead to improved analysis of the probability and magnitude of project risk and to effective responses. Understanding the relationships between risks may provide a better understanding of the possibility and magnitude of project risk than if risks are only considered as separate and independent events.

Common Root Cause Identifying common root causes of a group of risks may reveal both the magnitude of the risk event for the group as a whole along with effective strategies that might address several risks simultaneously.

Dependency of Risks on Each Other some risks may be linked with others in a causal chain, and understanding the chain of risks may lead to a better understanding of the implication of risk for the project.

Perform Qualitative Risk Analysis -Process

Inputs : Plan Risk Management Key elements of the risk management plan for Perform Qualitative Risk Analysis include roles and responsibilities for conducting risk management, budgets, schedule activities for risk management, risk categories, definitions of probability and impact, the probability and impact matrix, and revised stakeholders’ risk tolerances. These inputs are usually tailored to the project during the Plan Risk Management process. If they are not available they can be developed during the Perform Qualitative Risk Analysis process

Inputs : Project Scope Statement Projects of a common or recurrent type tend to have more well- understood risks. Projects using state-of-the-art or first-of-its-kind technology, and highly complex projects, tend to have more uncertainty. This can be evaluated by examining the project scope statement

Inputs : Organizational Process Assets The organizational process assets that can influence the Perform Qualitative Risk Analysis process include, but are not limited to:  Information on prior, similar completed projects,  Studies of similar projects by risk specialists, and  Risk databases that may be available from industry or proprietary sources.

T&T : Risk Probability and Impact Assessment Risk probability assessment investigates the likelihood that each specific risk will occur. Risk impact assessment investigates the potential effect on a project objective such as schedule, cost, quality, or performance, including both negative effects for threats and positive effects for opportunities.

T&T : Risk Probability and Impact Assessment Probability and impact are assessed for each identified risk. Risks can be assessed in interviews or meetings with participants selected for their familiarity with the risk categories on the agenda. Project team members and, perhaps, knowledgeable persons from outside the project, are included

T&T : Risk Probability and Impact Assessment The level of probability for each risk and its impact on each objective is evaluated during the interview or meeting. Risk probabilities and impacts are rated according to the definitions given in the risk management plan. Risks with low ratings of probability and impact will be included on a watch list for future monitoring.

T&T : Probability and Impact Matrix Risks can be prioritized for further quantitative analysis and response based on their risk rating. Evaluation of each risk’s importance and, hence, priority for attention, is typically conducted using a look-up table or a probability and impact matrix. Such a matrix specifies combinations of probability and impact that lead to rating the risks as low, moderate, or high priority

T&T : Probability and Impact Matrix

The dark gray area (with the largest numbers) represents high risk, the medium gray area (with the smallest numbers) represents low risk, and the light gray area (with in-between numbers) represents moderate risk

T&T : Risk Data Quality Assessment A qualitative risk analysis requires accurate and unbiased data if it is to be credible. Analysis of the quality of risk data is a technique to evaluate the degree to which the data about risks are useful for risk management.

T&T : Risk Categorization Risks to the project can be categorized by sources of risk (e.g., using the RBS), the area of the project affected (e.g., using the WBS), or other useful category (e.g., project phase) to determine areas of the project most exposed to the effects of uncertainty. Grouping risks by common root causes can lead to developing effective risk responses.

T&T : Risk Urgency Assessment Risks requiring near-term responses may be considered more urgent to address. Indicators of priority can include time to affect a risk response, symptoms and warning signs, and the risk rating. In some qualitative analyses the assessment of risk urgency can be combined with the risk ranking determined from the probability and impact matrix to give a final risk severity rating.

T&T : Expert Judgment Expert judgment is required to assess the probability and impact of each risk to determine its location in the matrix shown in earlier slides. Experts generally are those having experience with similar projects that occurred in the not- too-distant past. In addition, those who are planning and managing the specific project are experts, particularly about the specifics of that project.

Output : Risk Register Updates The risk register updates from Perform Qualitative Risk Analysis include:  Relative ranking or priority list of project risks.  Risks grouped by categories.  Causes of risk or project areas requiring particular attention.  List of risks requiring response in the near- term.  List of risks for additional analysis and response  Watch lists of low-priority risks.  T rends in qualitative risk analysis results.

Relative Ranking or Priority List of Project Risks The probability and impact matrix can be used to classify risks according to their individual significance. Using combinations of each risk’s probability of occurring and the impact on objectives if it were to occur, risks will be prioritized relative to each other by sorting them into groups of “high risk,” “moderate risk,” and “low risk.” Risks may be listed by priority separately for schedule, cost, and performance since organizations may value one objective over another.

Risks Grouped by Categories Risk categorization can reveal common root causes of risk or project areas requiring particular attention. Discovering concentrations of risk may improve the effectiveness of risk responses

In this Lecture, we have discussed about  Assessment of Risk  Source of risk  Application of qualitative risk analysis  Qualitative risk analysis process  Perform qualitative risk analysis process Summary of This Lecture

End Note Project Management does not guarantee the success, But it increases the likelihood of the success of the project

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