11.3 Perform Qualitative Risk Analysis 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 Initiation Planning Execution Close Monitor Control Adapted from PMBOK 5th Edition

11.3 Perform Qualitative Risk Analysis Inputs to Qualitative Risk Analysis Draft Risk Register Risk Management Plan Project Scope Statement Enterprise Environmental Factors: Industry studies of similar projects Risk databases from industry or proprietary sources 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 Risk ID Risk Category Risk Description Risk Owner MK001 Marketing Marketing may not be able to book the required advertising with the Fairfax group due to conflict of interest Brian Green Initiation Planning Execution Close Monitor Control Adapted from PMBOK 5th Edition

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

11.3 Perform Qualitative Risk Analysis Risk Data Quality Assessment – Assess the degree to which the data about risks is useful for risk management Factors: Degree to which the risk is understood Accuracy, quality, reliability and integrity of the data about the risk Risk Urgency Assessment – Near-term = urgent Time to affect the risk Symptoms and warning signs

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

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 Medium Risk High Low Probable Likelihood Improbable Low Risk Green Business as Usual Acceptance Medium Risk Amber Heightened Action Monitor Closely High Risk Red Immediate Action Mitigate or Avoid Minor Major Consequence Risk Management Guidelines – Companion to AS 4360:2004

Likelihood and Consequences Simple Likelihood Scale Simple Consequences Scale Rating Definition Scale Almost Certain Will definitely occur or will occur on an annual cycle 5 Likely Similar events have been experience several times in the past 20 years 4 Possible Will occur once every 20 years 3 Unlikely Occurs from time to time 2 Rare Occurrence is possible but highly unlikely 1 Rating Definition Scale Severe Most objectives cannot be met 5 Major Some important objectives cannot be met 4 Moderate Some objectives impacted but may still be met 3 Minor Minor effects that can be remedied 2 Negligible Almost no impact on objectives 1 Adapted from Risk Management Guidelines – Companion to AS 4360:2004

Consequence/Impact Scales from PMBok From PMBoK Guide – 5th Edition

Risk Rating Matrix and Risk Urgency Put your likelihood and consequence ratings together and what do you get? Risk Rating = Likelihood x Consequences Risk Urgency = RED, GREEN, AMBER Rating Severe Major Moderate Minor Negligible Almost Certain Red 25 20 15 Amber 10 Green 5 Likely 16 12 8 4 Possible 9 6 3 Unlikely 2 Rare 1

Risk Categorisation – Breakdown Structure Project Risk Breakdown Structure Project Management External Technical Organisational Estimating Planning Controlling Communication Subcontractors & Suppliers Regulatory Market/Economy External Customer Environment Requirements & Scope Quality Performance & Reliability Complexity Technology Dependencies PM Environment Prioritisation Funding Human Resources Methodology & Materials Adaptations and additions to the example in the PMBOK Adapted from PMBoK Guide – 5th Edition

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 Watch lists of low priority risks Trend analysis Assumptions log Initiation Planning Execution Close Monitor Control Adapted from PMBOK 5th Edition

Inclusions in Risk Register During Analysis Risk ID Risk Category Risk Description Risk Owner Likelihood Impact Risk Rating Management /Mitigation Strategies Residual Likelihood Residual Impact Residual Rating Status Priority 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 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 Adapted from PMBOK 5th Edition

Example – next part of Risk Register Risk ID Risk Category Risk Description Risk Owner Likelihood Impact Risk Rating MK001 Marketing Marketing may not be able to book the required advertising with the Fairfax group due to conflict of interest Brian Green 5 4 20 HR001 Human Resources May not be able to obtain a qualified Plumber in the time available Fred Jones 3 12 Refer to Slide 6 for Legend showing scales for likelihood and impact Adapted from PMBOK 5th Edition