3176 Registered Users
Skip Navigation LinksHome > ITTO Section > Project Risk Management > Perform Quantitative Risk Analysis

Introduction


- While Perform Qualitative Risk Analysis process is concerned with addressing the right and high-priority risks on the project, Perform quantitative risk analysis process is concerned with assigning a numeric value to the impact the identified risks can cause to the project objectives - schedule and cost mainly.
- Not all projects can do a quantitative risk analysis because of the need to model the data to simulate the quantitative effects of the identified risks on the project objectives.
- Where feasible, Perform Quantitative risk analysis process must be performed as part of the Control Risks process to determine if the overall project risk has been decreased.
- This process is also concerned with checking what is the confidence level of project success, given the project constraints of schedule and cost.
- This process also deals with checking if the process established for managing risk reserves specified in cost and schedule management plans are good to handle the identified risks.

Inputs


- Risk Register: List of qualified risks needing further analysis.
- Risk Management Plan: The process to perform quantitative risk analysis.
- Cost management Plan: Among other planning processes, has details about how risk reserves will be managed.
- Schedule management Plan: Among other schedule planning processes, has details about how risk reserves will be managed.
- OPA: Lessons learnt from prior projects
- EEF: Industry study of similar projects, risk databases, external factors can have an effect on the quantitative risk analysis process.

Tools & Techniques


- Data Gathering and Representation Techniques:
> Interviewing: Optimistic, pessimistic and most likely cost estimates for risk based on experience.
> Probability Distributions: The range of cost and schedule estimates used in models and simulations in order to quantify the risks identified.
- Quantitative Risk Analysis and Modeling Techniques:
> Sensitivity Analysis: The interdependency between risks and the project objectives. The idea is to keep one at base level and check the impact on the other. This analysis is done using Tornado Diagram. In a tornado diagram, the Y-axis contains each type of uncertainty at base values, and the X-axis contains the spread or correlation of the uncertainty to the studied output.
> Expected Monetary Value Analysis: A statistical concept that quantifies the threats and opportunities using a decision tree, threats are assigned negative value and opportunities are assigned positive values. The total decides the final outcome.
> Modeling and simulation: E.g. Monte Carlo Analysis. The probability distribution of cost or activity estimates are built into a model to see the possibility of reaching the project objectives.
- Expert Judgment: Useful in analyzing the data and also its interpretation. Experts also determine which tool is relevant for which project context.

Outputs


- Project Documents Updates: Risk Register Updates could include –
> Probabilistic analysis of the project
> Probability of achieving and time and cost objectives
> Prioritized list of Quantified Risks
> Trends in Quantitative Risk Assessment

Match the Following


1. Simulation - a. Probability of achieving cost and time objectives
2. Perform Quantitative Risk Analysis - b. Monte-Carlo Analysis
3. Sensitivity Analysis - c. Opportunities v/s threats
4. EMV Analysis – d. Risk Reserve management
5. Schedule Management Plan – e. Tornado Diagram

Match the Following (Answers)


1. Simulation - b. Monte-Carlo Analysis
2. Perform Quantitative Risk Analysis - a. Probability of achieving cost and time objectives
3. Sensitivity Analysis - e. Tornado Diagram
4. EMV Analysis – c. Opportunities v/s threats
5. Schedule Management Plan – d. Risk Reserve management