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
Monitor
• Occurs during Planning
Initiation
Planning Execution
Close
Control
Adapted from PMBOK 4th Edition
BSBPMG508A Manage Project Risk
11.3 Perform Qualitative Risk Analysis
• Inputs to Qualitative Risk Analysis
 Draft Risk Register
 Risk Management Plan
 Project Scope Statement
 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
Monitor
Initiation
Planning Execution
Close
Control
Adapted from PMBOK 4th Edition
BSBPMG508A Manage Project Risk
11.3 Perform Qualitative Risk Analysis
• Tools and techniques for qualitative risk analysis
include Risk Probability &
Impact Assessment
Expert
Judgement
BSBPMG508A Manage Project Risk
Probability &
Impact Matrix
Risk Data Quality
Assessment
Risk Urgency
Assessment
Risk
Categorisation
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
BSBPMG508A Manage Project Risk
Basic Risk Analysis Matrix
• For example
Low
Risk
Green
Business as
Usual
Acceptance
Medium
Risk
Amber
Heightened
Action
Monitor
Closely
Immediate
Action
Mitigate or
Avoid
High
Risk
Red
Probable
Improbable
 How risks are treated
 How closely they are
monitored
 How quickly they must be
resolved if they occur
Likelihood
• Determines Medium
Risk
High
Risk
Low
Risk
Medium
Risk
Minor
Major
Consequence
Risk Management Guidelines – Companion to AS 4360:2004
BSBPMG508A Manage Project Risk
Likelihood and Consequences
Simple Likelihood 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
Simple Consequences Scale
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
BSBPMG508A Manage Project Risk
Risk Rating Matrix and Risk Urgency
• Put your likelihood and consequence ratings together
and what do you get?
Rating
Severe
Major
Moderate
Minor
Negligible
Almost
Certain
Red
25
Red
20
Red
15
Amber
10
Green
5
Likely
Red
20
Red
16
Amber
12
Amber
8
Green
4
Possible
Red
15
Amber
12
Amber
9
Green
6
Green
3
Unlikely
Amber
10
Amber
8
Green
6
Green
4
Green
2
Rare
Green
5
Green
4
Green
3
Green
2
Green
1
Risk Rating = Likelihood x Consequences
Risk Urgency = RED, GREEN, AMBER
BSBPMG508A Manage Project Risk
Risk Categorisation – Breakdown Structure
Project Risk
Breakdown Structure
Project Management
External
Technical
Organisational
Estimating
Subcontractors &
Suppliers
Requirements
& Scope
Dependencies
Planning
Regulatory
Technology
Human Resources
Controlling
Market/Economy
Complexity
Funding
Communication
External Customer
Performance
& Reliability
Prioritisation
Environment
Quality
PM Environment
Adaptations and additions to the example in the PMBOK
Methodology &
Materials
Adapted from PMBoK Guide – Fourth Edition
BSBPMG508A Manage Project Risk
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
 Risks grouped by categories
 Root cause analysis
 Watch lists of low priority risks
 Trend analysis
Monitor
Initiation
Planning Execution
Close
Control
Adapted from PMBOK 4th Edition
BSBPMG508A Manage Project Risk
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
Likelihood
Risk Rating
•
•
•
•
•
• Combines Likelihood and Impact
• Normally multiplied together
• Enables overall prioritisation of risks
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
Residual
Rating
Status
Priority
Management/Mitigation Strategies
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
•
•
•
•
Avoid – remove entirely
Mitigate – reduce likelihood or impact
Accept – normally for LOW risks
Transfer – to another party, eg contract or outsource
Adapted from PMBOK 4th Edition
BSBPMG508A Manage Project Risk
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
Residual Likelihood
• Probability of risk occurring after management or mitigation actions
Residual Impact
Status
• Impact of risk occurring after management or mitigation actions
• Typically RED, GREEN, AMBER
Priority
• Typically HIGH. MEDIUM. LOW
Residual Rating
• Revised risk rating
• Most important for risk monitoring
Adapted from PMBOK 4th Edition
BSBPMG508A Manage Project Risk