Type: Discussion Board
Unit: Project Quality and Risk Management
Due Date: Tue, 2/6/18
Grading Type: Numeric
Points Possible: 75
Points Earned: 0
Deliverable Length: 150 words
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Question1: What are the differences between qualitative and quantitative risk analysis?
Risk is an element of all projects which must be planned for. “No amount of planning can overcome risk, or the inability to control chance events. In the context of projects, risk is an uncertain event or condition that, if it occurs, has a positive or negative effect on project objectives. A risk has a cause and, if it occurs, a consequence” (Larson, p. 205). The risk management process begins by gathering the key team members and stakeholders and generating a list of all the possible risks that could affect the project. “The team uses brainstorming and other problem identifying techniques to identify potential problems” (Larson, p. 207). After brainstorming, an assessment (step 2 in the process) can be made to eliminate redundancies and rank order the list in some fashion. Impact scales can be a challenge because risks affect project objectives differently. “For example, a component failure may cause only a slight delay in project schedule but a major increase in project cost. If controlling cost is a high priority, then the impact would be severe. If, on the other hand, time is more critical than cost, then the impact would be minor” (Larson, p. 211). Responses to risk (step 3) can be classified as mitigating, avoiding, transferring, sharing, or retaining (Larson, p. 214). Risk response is put in the plan, where a contingency plan is actions taken when the risk occurs to reduce or mitigate the negative impact of the risk event. The last step is risk control, where the risk register details all identified risks, including descriptions, category, and probability of occurring, impact, responses, contingency plans, owners, and current status. “Risk control involves executing the risk response strategy, monitoring triggering events, initiating contingency plans, and watching for new risks” (Larson, p. 224). In analyzing risk, qualitative and quantitative techniques are available.
“Perform qualitative risk analysis is the process of prioritizing risks for further analysis or action by addressing or combining their probability of occurrence and impact” (PMBOK, p. 328). The benefit of this process is it focuses attention on the high-priority risks, those being high probability of occurring and high impact to the project. Once high-priority risks are identified, they can be dealt with in perform quantitative risk analysis or plan risk responses processes.
“Perform quantitative risk analysis is the process of numerically analyzing the effect of identified risks on overall project objectives” (PMBOK, p. 333). The benefit of this process is it produces quantitative risk information to support decision making in order to reduce project uncertainty. Quantitative analysis can be dealt with using numbers to quantify a cost impact. The cost impact is place in the budget in order to mitigate the risk impact. Quantitative risk assessment addresses the uncertainty in project cost estimates, uncertainty in task durations, and cost consequences due to the occurrence of a risk event. In the case of risk events, a technique called expected monetary value (EMV) analysis is used. “EMV is calculated by multiplying the value of each possible outcome by its probability of occurrence and adding the products together” (PMBOK, p. 333). A decision tree is useful in illustrating potential paths of possible project scenarios.
Question2: When is each type of analysis appropriate?
When credible numerical data is available, quantitative risk analysis should be performed. When numerical data is not available, a best effort should be made to quantify the probability of risk occurrence and its impacts. “Although many managers believe that in the final analysis, risk assessment and contingency planning depend on subjective judgment, some standard method for identifying, assessing, and responding to risks should be included in all projects. The very process of identifying project risks forces some discipline at all levels of project management and improves project performance.” (Larson, p. 229)
Question3: What type of analysis will you use for the IRTC customer service system project?
I used the technique discussed in Larson, which is to identify the list of risks, assess the risk and determine high-priority risks, determine a response to the high-priority risks, and plan risk response control. The identified high-priority risks are then dealt with in quantitative risk analysis or plan risk responses processes, as appropriate (MUSE-372).
Larson, E.W. (2016), “Project Management: The Managerial Process, Sixth Edition,” McGraw-Hill Education.
MUSE-372 (2017), “Risk Identification and Response,” My Unique Student Experience (M.U.S.E.). Retrieved from: https://class.ctuonline.edu/_layouts/MUSEViewer/Asset.aspx?MID=9865347&aid=9865372
PMBOK (2013). “A Guide to the Project Management Body of Knowledge (PMBOK® Guide), Fifth Edition,” Project Management Institute.