Difference Between Quantitative and Qualitative Risk Analysis
Risk analysis and assessment is one of the most important tasks for any project. It is essentially the most important step taken by a proactive manager or team leader, and helps much in the longer scheme of things.
The two types of risk analysis- quantitative and qualitative, in actuality, are steps of an overall risk assessment process. The risk analysis process runs through the following steps.
All the risks associated with the project are listed. They may be big, small, or completely immaterial, but the first process requires them to be listed
All the risks are assessed and ranked on various factors here. A few factors involved are probability and impact. Impact may be in terms of cost or time, or the overall project completion issues.
The list is filtered and the risks which have been marked for further analysis are filtered out.
The risks marked for further analysis are analysed in details with all the pros and cons. The effect of each identified risk is noted and analysed in detail. The outcome, if the risk situation actually occurs, is also studied. The findings are then studied for how to eliminate or minimize the risks, and work on project success.
Key Differences between Quantitative and Qualitative Risk Analysis
- Qualitative Analysis is a preliminary step while Quantitative Analysis is a climax step.
- In Qualitative Analysis, each risk is carefully analysed for all risk probabilities and possible impacts. In Quantitative Analysis, the filtered risks which are high on impact or probability are analysed for the proper risk analysis and assessment. They are also studied for elimination, or minimizing, or working with the risk factor.
- Qualitative Analysis isn’t a mathematical calculation but a probability rank. Quantitative Analysis is a mathematical calculation.
- Qualitative Analysis is applied to each possible risk. Quantitative Analysis is applied to only high or high-medium probability or impact risks.
- Usually a ranking of 0 to 1 is used for each risk, 1 being high, during the process of Qualitative Analysis. In Quantitative Analysis though, detailed cost and time impact of the risk, if it comes true, are studied.
- Qualitative Analysis is applied to most projects while the lower or mid-level projects may not have the application of Quantitative Analysis at all times.
Risk Analysis and Assessment is one of the most important tasks in the success of a project. Be it a small or large project, at least Risk Register and Qualitative Analysis part is a must. Risk analysis saves you much trouble. If you are prepared for a risk, even if you can’t avoid it, you’ll be able to manage it better. A proactive manager will always rely on his risk analysis skills. While crisis may also come anytime, and it’s important to have the skills of a crisis manager, you need to be a better risk analyst for higher frequency of project success.