Qualitative Risk Analysis and the PMP® Exam
Setting priorities and determining action plans related to risks is crucial to your success as a project manager and the overall health of your projects. Performing qualitative risk analysis is one PMP exam process that can help you evaluate risks and assess where your time and effort are most needed. Here at Project Management Academy, we understand how important it is to understand qualitative risk analysis for the PMP exam and general project risk management. In this guide, you will learn about qualitative risk analysis and how to perform it for the PMP Exam.
On this page:
- What is the qualitative risk analysis process?
- Tools and techniques for qualitative risk analysis
- Qualitative vs quantitative risk analysis
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What is Qualitative Risk Analysis and How to Perform this PMP Process
Performing qualitative risk analysis is an essential step in project risk management. During this process, project managers will prioritize risks by assessing their probability and impact.
All projects come with positive and negative risks, also known as opportunities and threats. However, due to resource limitations, you most likely won’t be able to spend effort on every risk. Qualitative risk analysis allows you to identify urgent risks that require attention while reducing the level of overall uncertainty in the project.
When and how to use qualitative risk analysis in projects
You should perform qualitative risk analysis early on in your project. Doing so allows you to prepare for and prioritize various project risks by understanding how likely they are to happen, how they could affect the project, and what you should do to prevent threats and capitalize on opportunities.
However, as with risk identification and other risk management activities, qualitative risk analysis should occur throughout your project. Risks can come and go during your project’s life cycle, and their severity may also change over time.
Inputs required to perform qualitative risk analysis PMP
You should use multiple inputs to inform your qualitative risk analysis. These inputs fall under four categories: project management plan, project documents, enterprise environmental factors, and organizational process assets.
Project management plan inputs can include the following:
- Risk management plan: the most relevant input in this category. The risk management plan helps you decide how to analyze, prioritize, and respond to various project risks.
- Cost management plan: helps you outline and control your project budget. You can use the cost management plan to better understand cost-related project risks.
- Schedule management plan: helps you outline and control your project schedule. you can use this plan to better understand schedule-related project risks.
- Scope baseline: documents the approved project scope statement and wor breakdown structure. You can use the scope baseline to help prioritize risks or reassess them if your actual project progress differs from your planned results.
Project documents that can contribute to qualitative risk analysis can include:
- Risk register: used to track and report on project risks. You can use the risk register to document priority levels for risks and organize any other relevant information identified.
- Assumption log: a list of assumptions made related to your project. Making too many assumptions or assumptions on bad information can complicate risk identification and other activities.
- Stakeholder register: a directory of project-related individuals whose risk tolerances, appetite, and opinions you should consider. Understanding your stakeholder register may also uncover sources of bias to help you assess risks more objectively.
Enterprise environmental factors (EEFs) include organizational culture, marketplace conditions, the geographic distribution of facilities and resources, and legislation. EEFs occur both within and outside your project team and organization. Assessing EEFs can help you identify more risks and determine how urgent they are. Some examples of EEFs include:
- Industry studies
- Commercial risk databases
- Product, quality, and government standards
- Current events
Organizational process assets include any information your organization has already acquired or established, such as information from past projects. OPAs are plans, processes, policies, procedures, and knowledge bases specific to and used by the performing organization. Things like internal policies on hiring contractors or employees, PMO templates for cost, schedule, or scope baselines, or your company’s Lessons Learned Repository would be included here.
The input of performing a qualitative risk analysis
What does qualitative risk analysis feed or drive in the project risk management process? After performing qualitative risk analysis, you will have updates for various documents, such as your assumptions log, risk register, risk report, and more. Entering the results from your qualitative risk analysis into these documents will help you prepare in case a risk event occurs.
Each time you reassess and reprioritize project risks, you should also update the relevant project team members with the latest information. This step will keep everyone on the same page regarding what risks to keep an eye on and who is in charge of various risk responses.
Tools and techniques for qualitative risk analysis
You should know the following tools and techniques related to qualitative risk analysis for the PMP exam and performing qualitative risk analysis for your projects:
- Expert judgment
- Data gathering, interviews, and meetings
- Data analysis:
- Risk data quality assessments
- Risk probability and impact assessment
- Interpersonal and team skills
- Risk categorization using the risk breakdown structure
- Data representation:
- Probability and impact matrix
- Bubble charts or other hierarchical outputs
- Risk register
You may be asked to identify how to use these tools or techniques for the PMP exam, so you should be familiar with them and how they relate to this process.
Studying for the PMP Exam?
Perform Qualitative vs Quantitative Risk Analysis for the PMP Exam
While qualitative and quantitative risk analyses share some similarities and can often be performed in tandem, you should understand what sets them apart, especially as you work through PMP prep work for the exam.
Similarities between qualitative and quantitative risk analysis
Qualitative and quantitative risk analysis both fall within the project risk management knowledge area. Each process involves evaluating the probability and impact of various project risks. As a result of both types of risk analysis, you can update your risk report, risk register, and other documents with relevant information.
Difference between qualitative and quantitative risk analysis
Quantitative risk analysis has more limited use cases than qualitative risk analysis. Here are some other differences between qualitative and quantitative risk analysis:
Qualitative risk analysis:
- Should always be performed
- Prioritize and categorize risks through subjective analysis
- Involves subject matter experts
- Relatively quick
Quantitative risk analysis:
- Optional, but highly recommended for large or complex projects
- Can be used to create contingency reserves in both time and money.
- Involves calculating and assigning a numerical value related to the probability of completing the project as planned
- Takes more time
Since quantitative risk analysis requires a deeper dive using measurable data, whether you can perform it will depend on the project type, risks, and data available. In contrast, you can and should always perform qualitative risk analysis throughout every project.
When it comes to studying for the PMP exam, you should at a minimum focus on the most critical content areas for performing qualitative risk analysis:
You may encounter questions that will present some information or a hypothetical project situation and you will need to be able to determine how your project might be affected.
Qualitative risk analysis is a critical process to understand for the PMP exam and to improve your work as a project manager. Learn more about project risk management or sign up for a training course with the experts at Project Management Academy.
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