Perform Qualitative Risk Analysis

00:01 Hello and welcome.

00:02 This module focuses on the perform qualitative risk analysis process and the PMBOK guide.

00:11 The difficulty, memorization and exam importance are all rated as medium. If you haven't done any qualitative analysis before in your career to date, some of those may change to high.

00:25 So in this case, pay particular attention to the section.

00:30 The particular domain task that the perform qualitative analysis process helps us understand is planning task 10, which is develop the risk management plan by identifying, analyzing and prioritizing project risks and defining risk response strategies in order to manage uncertainty and opportunity throughout the project lifecycle. And obviously, the key word we're looking at now is analyzing with qualitative risk analysis.

01:05 The key themes of the reform qualitative risk analysis process include we're going to assist the probability and impact of all identified risks, and I stress that all identified risks quickly and subjectively, and it's usually done very rapidly on the project in order to determine which risks are the highest priority.

01:29 We may then choose to use this list of high priority risks and do further quantitative analysis on them, but we do qualitative on all risks in the project.

01:41 We're going to examine each risk from the risk register and analyze it in terms of probability and impact.

01:48 Again, subjectively.

01:52 And remember, those risks with the highest combination of probability and impact are the most important ones.

01:58 And as I've already said, we may choose to use those to go on and do quantitative analysis to.

02:06 So let's take a look at the potential inputs that we could use.

02:10 First and foremost, obviously our risk management plan.

02:14 It's the plan that provides guidance to us on how we're going to do this activity.

02:19 So of course we want that.

02:21 We may also want our scope baseline.

02:24 And remember, the scope baseline is an output from a defined scope process, and it includes three elements the scope statement, the work breakdown structure and the work breakdown structure dictionary.

02:37 But here we can double check that we've accounted for all risk in our scope by looking for uncertainty in our scope baseline, either in the scope statement, the work breakdown structure or the Work Breakdown Structure Dictionary.

02:53 Obviously, we'll want our risk register as well, whatever iteration is that we're at because we want that list of identified risks, but results on those that were going to perform qualitative risk analysis.

03:07 So without them, we can't do this.

03:10 We may also want enterprise environmental factors, government regulations and industry standards about the level and depth and type of acceptable qualitative risk analysis and also organizational processes, particularly our project management methodology and our blank or full now risk register.

03:35 So remember, the risk management plan is an input will provide guidance on how qualitative analysis will be done, and I can't stress this enough.

03:44 It's really important that you understand that we don't do work until we have a plan and in this case, it's the risk management plan.

03:53 The particular tools and techniques that we may choose to use if appropriate upon those inputs are risk probability and impact assessment.

04:03 Now for qualitative risk analysis, this is actually really easy to do and I've done it many times quickly and workshops.

04:12 What you're simply asking people usually and hopefully with some knowledge of the risk is what do they think the probability will be? And what do they think the impact will be? Now, of course, you give them a predefined scale.

04:26 A scale of zero to one as in percentages.

04:29 Scale of one to five one to ten or some ticks something like highly likely likely, neither likely or unlikely.

04:37 Unlikely. Highly unlikely.

04:41 Then you can multiply those two things together.

04:45 But because there's some subjectivity in this, we may want to offer people a probability and impact matrix to help standardize what can be quite subjective responses.

04:58 We'll also want to examine the quality of the data that we're using and make notes about it with risk data quality assessment.

05:05 How good is our assessment? How good was the experience of those experts? Do we need to go back in the future when we've tested some of the assumptions or got greater clarity around our risks? We'll also want to do some risk categorization in order to figure out which of the highest risks, the moderate risks and the low risks.

05:28 And my simple tip for this is to use an Excel spreadsheet or something similar and use conditional formatting to turn them a different color if they reach a certain score. We'll also want to include a risk urgency assessment here so we can figure out which risks we need to be focused on in the short term, the medium term and the long term.

05:49 And, of course, expert judgment.

05:51 You're an expert.

05:52 Your project team members, particularly those who have done the sort of work before, are experts, your project sponsor, the client and maybe you want to utilize risk management professionals here as well to help you do your qualitative analysis. Here's an example of some probability and impact assessment.

06:15 This information could have been gathered in a workshop where you gathered your team members together and you asked using consensus or majority voting or any other one of those techniques for people's input.

06:28 Perhaps you ask them.

06:29 We've identified a risk around financial risk.

06:34 What is the probability on a scale of one to five? They've said four, which is high.

06:38 One being no risk.

06:40 Five being very high probability.

06:42 Almost certain.

06:44 And then you ask them, Well, what is the impact then if that financial risk does manifest? And they've given you a score of three? Multiply those two together and you get a cumulative score of 12.

06:57 Now what we've done here with the spreadsheet is anything over 14 goes read anything between 10 and 14 goes orange and nine or less goes green.

07:09 So using conditional formatting straight away, we can see the technical risk that's been identified is in fact the highest ones of these, and we may wish to pay closer attention to that risk.

07:22 So that's a simple probability and impact assessment.

07:25 And in my experience, it's always done quickly.

07:28 And if you use the right, people can be quite accurate as well.

07:34 Now, a probability and impact matrix allows you to show which of your risks you're going to focus on.

07:40 It shows the impact and it shows the probability and it shows some sort of color scheme.

07:47 And in this instance, we can see that the Matrix we're provided those ones which are colored red have got a high probability and high impact, then orange all the way down to the light yellow and cream colors.

08:02 Here is another example of a probability and impact matrix this time we've used a scale of zero to one representing percentages, and we're making it clear to our stakeholders which ones were most interested in those that are colored red.

08:18 Our top priority, those that are colored green, our lowest priority.

08:22 We can leave those alone at the moment, but always keep an eye on them in case either probability or impact changes.

08:30 And you'll also see here we've divided into threats or negative risk or uncertainty and opportunities or positive risk and uncertainty.

08:39 So that's a probability and impact matrix.

08:43 Now, we may also wish to offer some form of standardization to what is essentially quite a subjective analysis.

08:52 So perhaps we've offered people a scale of one to five.

08:56 And yes, we've told them that one means very low and five means very high or very certain. But some people will still want greater information about that, so we can offer them this matrix.

09:09 And if we look at time, we can see that a one is very low, but it means no noticeable change to time.

09:16 A score of two means less than a 10 percent increase in time.

09:21 A score of three is a teen to a 20 percent increase in time.

09:26 A score of four is a 20 to 30 per cent increase in time.

09:30 And if you're going to give it a score of five, it's a greater than 30 percent increase in time.

09:37 So that helps standardize what can be quite a subjective experience.

09:42 Some other tools and techniques, as I've already mentioned, an examination of how accurate your data is with risk data quality assessment.

09:51 The accuracy of your data is uncertainty itself, and there's another risk on risk building up. So do document how accurate your data is. Where did it come from? How much experience did that person have? How relevant? How recent is it? Do you need to revisit it when you have further information? And obviously, a risk urgency assessment is useful as well, so you can categorize those risks that may occur in the short term, those that are in the medium term and those that may not happen for many months or years, depending on the length of your project. The single output of the perform qualitative risk analysis process simply says project document updates.

10:38 But the most important document you will be updating will be the risk register. You'll be adding information to it about probability and impact assessment.

10:48 You'll be adding information to it about categorization and identifying the highest risks, the moderate risks and the low risks.

10:57 So make sure that you keep updating a risk register, not just at the single point, but throughout your entire project lifecycle.

11:07 So in summary, the Perform qualitative risk analysis assessed and analyzed each of the identified risks on a qualitative or subjective basis.

11:19 And it's important that you understand that distinction between qualitative and quantitative analysis.

11:27 And qualitative analysis has examined the probability and impact, multiply them together and given us a prioritized list of risks.

11:36 And remember, we perform qualitative risk analysis on all of our project risks.

11:43 And that list that we generate of prioritized lists, we may then use that list to choose which risks we perform quantitative risk analysis on. So thank you very much.

11:57 This has been an introduction and an overview to the perform qualitative risk analysis process in the PMBOK guide.