Quantitative Project Risk Analysis

What is a quantitative project risk analysis, and how do I go about it?

What is quantitative project risk analysis?

·      Quantitative project risk analysis is the process of establishing the actual consequences of a risk event

·         In terms of time and money

·      It may be used to determine

·         The degree of overall project financial exposure

·         The level of reserve funds to be set aside

·         The value of a claim after the fact

·      The time dimension will depend on the urgency of recovery

·         And will influence the resulting cost

Assessing the consequential cost

·      In monetary terms, cost out

·         The cost of the effort in responding to the event

·         The cost of repairing the damage, and

·         The cost of getting back to where you were

(or the cost to the project of the resulting delay)

·      Just remember the "three Rs"

Respond, Repair, Recover!

What will it take?

·      Quantitative project risk analysis is work intensive and time consuming

·         It should only be applied to appropriate risks identified in the qualitative analysis

·      Some of the sources and techniques described earlier are equally applicable, such as

·         Historical information

·         Expert judgment

·         Team members' previous experience

·         Interviewing

What if the findings differ?

The quantitative analysis of several risk events may result in reappraisal of the qualitative findings

·         In the ranking or level of importance

·         Calling for a reexamination of the whole scenario

·         Or even the whole approach to the project's risk

·         Be aware also that the combined effect of several risk events can be even greater than the summary of their individual assessments might suggest

Otherwise, other techniques might be adopted

At this level of analysis, additional techniques are available, such as:

·         Continuous probability distributions

·         Sensitivity analysis

·         Decision tree analysis

·         Simulation

·         See next Issacon for details of some advanced techniques

If the project is critically sensitive?

If the project is particularly critical or sensitive in terms of any of its objectives

·         It may be advantageous to repeat some of the detailed quantitative analyses as the project progresses during implementation

·         Comparing successive results over time can provide valuable insight into project risk stability or trends

What have we accomplished?

Depending on the extent of quantitative analysis you decided to do, you end up with:

·         A revised risk ranking for the project

·         A probabilistic analysis forecasting time, cost and performance arising from the project risks analyzed

·         And hence the probability of achieving the project's objectives

·         A trend in project risk status

·         An updated list of project risks

·         As a basis for Response Planning