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Qualitative Risk Analysis is the process of prioritizing individual project risks for further
analysis or action by assessing their probability of occurrence and impact as well as other
characteristics by (PMBOK, 2017). While Quantitative Risk Analysis is the process of
numerically analyzing the combined effect of identified individual project risks and other sources
of uncertainty on overall project objectives according to (PMBOK, 2017).

The qualitative risk analysis is used to quickly identify risk areas related to project functions as it
relies on descriptive data and expert opinions, often gathered from interviews, discussions and
brainstorming sessions. For example, in a project of cluster homes construction, the project
manager holds a meeting and gets feedback on the potential risks from team members,
categorizing them according to their probability of occurrence and impact is qualitative risk
analysis. Quantitative risk analysis would be the most logical to use where decisions must be
made based on data by (Aven, 2016). Quantitative risk analysis provides more objective
information and accurate data than qualitative analysis because quantitative risk analysis is based
on realistic and measurable data used to calculate the impact values that the risk will create with
the probability of occurrence. In quantitative risk analysis, there is not enough data to be
analyzed, whereas in qualitative risk analysis there is enough data to be analyzed. Qualitative
risk analysis is quick to implement due to the lack of statistical/numerical dependence and
measurements and can be performed easily. For example, use of focus group discussion, where a
group of people talks about a topic to gather opinions that can be used for further analysis.
Quantitative risk analysis is objective and has more detail, contingency reserves and go/no go
decisions, it takes more time and is more complex. Quantitative data is difficult to collect and
can be prohibitively expensive by (Zio, 2013). Decision tree analysis estimated monetary value,
three-point estimate, and Monte Carlo analysis are examples of quantitative risk analysis.
Quantitative risk analysis is an objective, data-driven process that requires time and specialized
software to arrive at a risk valuation. Qualitative risk analysis is a quick, subjective process that
relies upon the experience and institutional knowledge of the assessor. Qualitative risk analysis
evaluates and documents the probability and the impact of potential project risks against a pre-
defined scale. The scale can be defined from low to high, from 1 to 5, or from 0% to 100% (or 0
to 1) for probability. For example, a risk of failing to obtain a roadwork permit before the start of
the project with quite high impact will be ranked 4 on a 1 to 5 scale, while the probability of the
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same risk will be estimated as 30%, or 0.3. Risks can be additionally categorized according to
their source or effect, such as regulatory risks or risks leading to delays. The purpose of this risk
analysis is to increase the awareness of the most likely and severe risks, identify weak spots of a
project, and create risk responses to reduce the effect that these risks will have on a project.
Quantitative risk analysis numerically evaluates the effect of potential project risks on project
targets by (Pasman, 2014). It is focused on creating realistic time and cost targets and calculating
the probability of achieving project objectives. For example, it will quantify the impact of failing
to obtain a roadwork permit before the start of the project as causing a week’s delay and costing
$50,000. Quantitative risk analysis is usually carried out only for the highest probability and
impact risks. The main purpose of this analysis is to analytically identify the most effective risk
response strategies that will minimize the risk influence on project objectives. Many businesses
prefer the qualitative risk analysis method because the qualitative approach is easy to follow and
useful for smaller projects. While the quantitative approach requires mathematical calculation
and is resource and time-intensive. In the qualitative risk analysis process, potential risks are
rated according to how serious and likely they are to impact various stakeholders. This process
aims to generate a list of prioritized risks to focus on and increases the understanding of risks. In
qualitative risk analysis, one will examine risks for impact and probability of occurrence during
the project. Afterward, you will find the risk ratings using the risk analysis matrix. The risk
rating can be high, medium, and low.

Risk Analysis Matrix in Qualitative Risk Analysis by (Pasman, 2014).

The risk analysis matrix is a great communication tool to communicate the risk information to
stakeholders to decide on the next action. The qualitative process usually uses expert judgment
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and historical data to conclude, while the quantitative process uses mathematical data sets to
derive conclusions. For example, a job for installation of a ketchup plant in a food industry,
qualitative process an expert can be consulted on the potential risks likely to be encountered
based on their expertise while for quantitative risk analysis mathematical data will be collected
and gathered to derive a conclusion. Qualitative risk analysis is a subjective analysis, while
quantitative risk analysis is an objective analysis based on quantitative data (verified data).
Simple projects for example building of a carport require only qualitative risk analysis, but larger
projects for example building of the mbudzi round-about require qualitative and quantitative risk
analysis. Qualitative risk analysis techniques are expert judgment, brainstorming, meeting, risk
assessment matrix. by (Zio, 2013) In contrast, quantitative risk analysis techniques are influence
diagrams, decision tree analysis, Monte Carlo simulation, expected monetary value. Qualitative
risk analysis is used when a new risk is identified or there is a change in the risk perception of
stakeholders. For example, the project was running in full swing, and suddenly, the rain started.
This was an identified risk, but some areas became slippery due to rain and caused several near-
misses. This risk was not identified, so the project manager noted this as new risk. The absence
of a team member is considered a low-rank risk, but when her absence starts causing trouble, the
project managers increase the risk rating under qualitative risk analysis. Quantitative risk
analysis is used when you need to validate qualitative risk analysis or when the stakes are high
by (Anthony, 2012) . Quantitative risk analysis quantifies overall project risk exposure and can
also provide additional quantitative risk information to support risk response planning. Example
of quantitative risk analysis is when an organization gets a project to build a refinery. This is a
large and multi-year project and is estimated to be completed in five years. Data for the project
has started to be collected and it took two months to collect the data.

Informing Risk Management

Qualitative Risk Analysis informs risk management by helping project managers identify which
risks require immediate attention and resources. It helps in developing risk response strategies by
focusing on high-priority risks. Quantitative Risk Analysis informs risk management by
providing a more detailed understanding of the potential impacts of risks. It helps in making
informed decisions about risk responses and resource allocation, allowing for a more data-driven
approach to managing uncertainties by (Pate-Cornell, 2012).
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REFERENCES
Anthony, L., 2012. Confronting Deep Uncertainities in Risk Analysis. 32(10), pp. 1607-1629.
Aven, T., 2016. Risk assessment and risk management. European journal of Operational
Research, 253(1), pp. 1-13.
Pasman, H., 2014. Past, present and future of Quantitative Risk Assessment (QRA) and the
incentive it obtained from Land-use. Journal of Loss Prevention in the Process Industries,
Volume 28, pp. 2-9.
Pate-Cornell, E., 2012. Risk Analysis. Risk Analysis and Management, 32(11), pp. 1823-1833.
PMBOK, 2017. PMBOK 6TH EDITION. In: Aguide to the project management Body of
Knowledge. Newton Square, Pennsylvania: Project Management Institute, Inc 14 Campus
Boulevard, p. 588.
Zio, E., 2013. Foundational Issues in Risk Assessment and Risk Management. 34(7), pp. 1164-
1172.