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# single-point estimates of probability of occurrence,

Probability And Impact Matrix

The matrix helps in identifying those risks which require an immediate response. The matrix may be customized according to the needs of the project. Most companies do have a standardized template for this matrix and project managers could leverage those templates as well. Use of standardized matrix makes the matrix list more repeatable between projects.

Risk Data Quality Assessment

Data is collated for the identified risks. The project manager will try to find the precision of the data that must be analyzed for completing the qualitative analysis of risks.

For each risk, in Risk Data Quality Assessment, the project manager needs to determine:

• Extent of the understanding of the risk
• Data available
• Quality and reliability of the data
• Integrity of the data

PERFORM QUANTITATIVE RISK ANALYSIS

The next step of Qualitative risk analysis is to analyze the probability and impact of risks in Perform Quantitative Risk. The purpose of Quantitative Risk Analysis is:

• Identification of risk response that requires urgent attention
• Identify the exposure of risk on the project
• Identify the impact of risk on the objective of the project
• Determine cost and schedule reserves that could be required if risk occurs
• Identify risks requiring more attention

DETERMINING QUANTITATIVE PROBABILITY AND IMPACT

Some of the techniques of quantitatively determining probability and impact of a risk include:

• Interviewing
• Cost and time estimating
• Delphi technique
• Historical Records
• Expert judgment
• Expected monetary value analysis
• Monte Carlo Analysis
• Decision tree

Expected Monetary Value Analysis

Expected Monetary Value is a good measure to determine the overall ranking of risks. The formula is:

EMV = P X I

Where, EMV = Expected Monetary Value

P = Probability

I = Impact

Monte Carlo Analysis (SIMULATION Technique)

The Monte Carlo analysis simulates the cost or schedule results of the project. The primary inputs for this analysis are the network diagram and estimates to perform the project

A Monte Carlo analysis:

• Requires a computer based program
• Evaluates the overall risk in the project
• Determines the probability of completing the project on any specific day, or for any specific cost
• Determines the probability of any activity actually being on critical path
• Path convergence is taken into account
• Cost and schedule impacts can be assessed
• Results in a probability distribution