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Qualitative Project Risk Analysis — Why It’s Important?

Risk analysis is an integral part of project management. Performing risk analysis can help pinpoint potential problems. Onthe basis of risk assessment, project managers can create a risk-handling plan and invoke it as required during the life of the project. This minimizes the adverse impacts on the project outcome.

One effective technique to create awareness of the risk includes qualitative project risk analysis. In this article, you will learn about what qualitative risk analysis is and why it’s crucial in effective project management.

What is Qualitative Project Risk Analysis?

Qualitative project risks analysis refers to identifying and prioritizing risks based on a pre-established scale. The identified risks that can relate to contractors, employees, or any other aspects of a project are scored based on the impact and the likelihood of occurrence.

The purpose of qualitative risk analysis is not just discovering project risks, but also prioritizing them. The risks are prioritized based on the different factors. Important factors that are considered when the risks are prioritized include:

• Impact on project objectives
• Cost impact
• Performance
• Impact on scope
• Project quality
• Impact on budget

Project managers can use a risk assessment matrix (RAM) technique to perform qualitative risk analysis. The RAM tool allows project managers to know about the risks for which a risk-handling response is necessary. It involves creating rating scales that reflect the impact and likelihood of the risks.

The likelihood rating of the risks is a subjective activity. Project managers must rate the project risks based on past experience and also present trends that can impact the project. They can also consider other factors such as economic, employee-related, or political events.

Another technique that has been recommended by the PMBOK for qualitative risk assessment is risk urgency analysis. This technique involves categorizing the risks that have been identified using the RAM technique in regards to time. In this way, even if a risk is ranked lower, it will become important if it occurs earlier as compared to a higher ranked risk. They must design a risk-handling response based on the importance and urgency of the identified risks using the two qualitative risk analysis tools.

Why is Qualitative Risk Assessment Important?

Qualitative risk analysis can help project managers to home in on risks that can have a significant impact on the project. They can prioritize the efforts and resources in containing the risks in relation to the impact. It will help in allocating resources effectively to handle the risks associated with the project.

Project managers need to make use of online work collaborative software to effectively manage the work. It can help them to marshal the project team and resources efficiently when any of the identified risks do occur. This will greatly minimize the impact of the adverse events on the project outcome.

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