What is project risk analysis? How to do it and methods

Job project risk analysis very important to ensure the success of the project. It also helps project managers have an overview of potential situations that could affect the final result. Let'ss Viindoo Learn more about methods of assessing and analyzing risks that can minimize their impact on business projects.

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1. What is project risk analysis?

Project risk analysis is the process of identifying and evaluating potential risks and negative impacts on the project through the use of related tools and techniques. The analysis, project risk management This helps managers to predict changes risk potential and how they impact the project in terms of quality, schedule or cost when they appear.

This is an important step in managing projects of the business. Analyze potential risks knot just for specifically for project management, it is also applied in many different fields such as administration, construction, and production.

Comparison between quantitative and qualitative analysis methodsAnalyze the probability of risks affecting the project

2. How to analyze project risks

Businesses want to minimize risks during project implementation. Creating an analysis plan to identify and evaluate potential risks and find ways to preserve or minimize them is essential. Let's Viindoo review the ways project risk analysis.

2.1 Analyze the probability of risk occurrence

The probability of a project risk occurring will often not follow a certain rule. However, businesses can determine that risk using data and experience from previous similar projects. This will help businesses determine whether the risk level of the current project is low or high. 

Comparison between quantitative and qualitative analysis methodsThe impacts of risks on the project

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2.2 Analyze the impact of risks

Some impacts of risks affect the project such as economics, materials, resources or project progress and schedule. To analyze these impacts, businesses can rank risks from low, medium, and high levels depending on their importance to the project. 

2.3 Analyze the level of risk

Risk level combined with risk probability is one of the formulas used by many businesses to determine the risk level of a project. With the level of risk determined, the business will come up with a strategic plan to see if the business can control it or not.

Formula to calculate risk level:

Level of risk = risk impact * risk probability.

For example, if a risk has an impact of 1 billion, then with a 70% probability of that risk occurring, the project's risk level is 700 million. 

Quantitative methods in risk analysisAnalyze the risk level of the project

3. Current effective project risk analysis methods

Choosing effective project risk analysis methods is important because they can help maximize forecasting and risk management. Below are two project risk analysis methods that are considered the most effective today.

3.1 Quantitative analysis method

Quantitative risk analysis method is to determine whether the project is feasible and suitable for reality or not. This method is clearly demonstrated through the number of possible risks and their impact on the overall project goals.

Depending on the project's risk management activities, businesses can apply quantitative analysis together or separately with qualitative methods. To determine the feasibility of high-value projects, businesses will use quantitative methods to analyze risks.

When using this method to analyze risks, businesses need to conduct research from aspects such as management planning, risk management plans, costs, project organization processes, and other factors. environment and risk register.

Thanks to diverse input data sources, the research process project risk analysis Can assess project risks accurately and objectively. However, this method requires the use of specialized software and expertise in building and analyzing risk models, so it is difficult, time-consuming and costly to implement. 

Quantitative methods in risk analysisQuantitative methods in risk analysis

3.2 Qualitative analysis method

Risk analysis using qualitative methods is the assessment of the likelihood and level of impact from which the importance of the risk can be determined. This is a foundational method for businesses to conduct more in-depth analysis of project risks using other methods.

The implementation of this method focuses on assessing the probability of a risk occurring and its impact on the project. As a result, a risk prioritization table will be established and managers will be able to focus on addressing higher priority risks.

To analyze project risks through qualitative methods, businesses need to ensure that information collection inputs such as project risk management plans, business environment factors, and organizational processes are collected. project, project scope and risk register.

A management plan and project risk analysis should be implemented early so that it can be predicted before project implementation. The result of project risk analysis using qualitative methods is to include these risks in project documents. 

Comparison between quantitative and qualitative analysis methodsQualitative methods in risk analysis

4. Compare quantitative and qualitative analysis methods

Currently, there are many methods to analyze potential risks to the project and every method has its own advantages. To help businesses see more specifically about these two risk analysis methods, Viindoo Give some reference criteria as follows: 

Characteristic Qualitative method

Quantitative methods

Concept Is the process of evaluating risks according to priority, individually. From there, it can be applied to serve in-depth risk assessments during the project management process

Is an overall analysis of risks that can impact the results of project implementation through specific, detailed numbers.

You can rely on the risk order to handle tasks with higher priority. In addition, this method also identifies those responsible for resolving potential risks.
Quantitative methods can evaluate the overall feasibility and feasibility of the project when affected by potential risks. The results of the research also help businesses plan and have plans to deal with risks.
Takes place throughout the project implementation process
Often used in high value projects.
Requirements for use
Requires the evaluator to have a professional, risk-biased attitude to determine the correct priority and analyze risks that may affect the project.
Using the software method requires qualified practitioners to be able to analyze and evaluate hidden information that affects the project.
The relationship between the two methods
Is the foundation for using quantitative analysis methods of the project
Usually performed after quantitative analysis methods. There are cases where this is done after the risk response plan.

Tools and techniques used

Assess the quality of risk data: Analysis results can be misleading if the input data is unreliable. Therefore, assessing the quality of data is important for qualitative methods.

Assess the likelihood and impact of risks: Depending on the effects of risks such as effects on overall cost, quality and efficiency, classify them into risk register or watchlist for monitoring. 

Risk classification: Classify risks by source, scope of impact, and cause. Determine which risks the project will be greatly affected by.

Potential and impact matrix: the project team will create a matrix that combines likelihood and impact to divide risks by priority.

Bubble chart: A bubble chart will display the relationship between risk parameters.

Risk workshop: Based on the project team's experience, risks will be analyzed and solutions will be provided.

Simulation: Simulate individual risks that affect the overall project goals.

Sensitivity Analysis: Analyze which risk impacts the project may be most affected by.

Tornado chart: Judge the level of impact on the project through the correlation coefficient calculation.

Decision tree analysis: Through the branches in the decision tree, you can choose appropriate options to solve the problem.

Comparison between quantitative and qualitative analysis methodsComparison between quantitative and qualitative analysis methods

Project risk analysisis an important and indispensable part of the project management process. Grasping and assessing risks will help businesses come up with solutions and minimize negative impacts on the project. Hopefully the above article by Viindoo can help businesses in analyzing the impact of risks.

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Jun Nguyen November 22, 2023