This document discusses various methods for analyzing risks in projects. It describes qualitative and quantitative risk analysis. Qualitative risk analysis involves prioritizing risks based on probability and impact, often using descriptive scales. Quantitative risk analysis uses numerical scales to measure probability and impact, and techniques like expected monetary value analysis to assign numeric estimates of risk impact. The document provides examples of probability and impact assessment scales, and explains how to use a risk assessment matrix to categorize risk levels.

1. Risk Analysis
SHOWAIB AHMED CHOWDHURY
Lecturer
Department of Building Engineering & Construction Management
Rajshahi University of Engineering & Technology(RUET)

2. Risk Analysis
Once you have identified the risks that could affect your project, you need to
determine which ones you will spend time and money on.
Risk analysis is the process of prioritizing risks based on the probability of the
risk occurring and the impact it would have on the project.
There are two primary methods of risk analysis you can use on your project...
•Qualitative Risk Analysis
•Quantitative Risk Analysis
The main difference between these two methods of risk analysis is
that qualitative risk analysis uses a relative or descriptive scale to measure the
probability of occurrence whereas quantitative risk analysis uses a numerical
scale.

3. Qualitative Risk Analysis
Studying the identify risks process should ideally lead to a question –
How long should I keep identifying risks?
Perform Qualitative Risk Analysis is all about analyzing the risks to
figure out two things,
How likely is it to occur?
What would its impact be?
All the risks can be categorized into 4 divisions,
• High Probability – High Impact
• Low Probability – High Impact
• Low Probability – Low Impact
• High Probability – Low Impact

4. At the end of the day, Perform Qualitative Risk Analysis process
helps you prioritize or rank risks for further analysis and action.

5. Risk Probability and Impact Assessment
“How do you determine if a risk is big or small?
How do you figure out how likely the risk is going to occur or
materialize?”
In order to handle risks,
1. You need to figure out how likely is it that the risk is going to
materialize by assigning a probability value based on the likelihood
of the risk’s occurrence
2. Once you have the probability figured out, you then work towards
estimating the cost or the impact of the risk if it does materialize
Using these values, you will be able to interpret which risks need a
pretty solid mitigation plan while which ones can be monitored as the
project progresses

6. Risk Probability Scale
RATING LIKELIHOOD DESCRIPTION
1 Very Low Highly unlikely to occur. May occur in
exceptional situations.
2 Low Most likely will not occur. Infrequent
occurrence in past projects.
3 Moderate Possible to occur.
4 High Likely to occur. Has occurred in past
projects.
5 Very High Highly likely to occur. Has occurred in
past projects and conditions exist for it
to occur on this project.
1.
2.

7. Impact Assessment Scale
RATING IMPACT COST SCHEDULE
1 Very Low No increase in
budget
No change to
schedule
2 Low < 5% increase in
budget
< 1 week delay to
schedule
3 Moderate 5-10% increase in
budget
1 - 2 weeks delay to
schedule
4 High 10-20% increase in
budget
2 - 4 weeks delay to
schedule
5 Very High > 20% increase in
budget
> 4 weeks delay to
schedule
1.
2.

8. These scales are very dependent on the specific details of your project.
A "Low" likelihood of occurrence for one project may mean a risk event
is unlikely to occur within the next 10 deployments. With another type
of project "Low" may mean that a risk event is unlikely to occur within
the next year.
The impact scale for your project could also include other
considerations such as scope, political, and employee impacts.
With your rating scales prepared, you can create a Risk Assessment
Matrix to help you categorize the Risk Level for each risk event.

13. Risk Appetites, Risk Tolerance, Risk Threshold
Risk Appetites is a general and subjective description of acceptable risk level.
Risk Tolerance is a measurable and specific level of risks.
Risk Threshold is a particular point at which risks become unacceptable.
The outputs of Qualitative Risk Analysis
• A prioritized list of risks.
• List of risks grouped by categories.
• List of risk for additional analysis and investigation.
• List of urgent risks.
• Watch List

14. Quantitative Risk Analysis
Qualitative risk analysis is a numeric estimate of the overall effect of
risk on the project objectives such as cost and schedule objectives.
‘Numerically’ being the keyword here.
Why Perform Quantitative Risk Analysis
• Better Overall Project Risk Analysis
• Better Business Decisions
• Better Estimates

15. Qualitative Risk Analysis Techniques
1. Expected Monetary Value Analysis
2. Sensitivity Analysis
3. Modeling and Simulation
Expected Monetary Value Analysis
With the help of EMV analysis you will be able to calculate the costs of all
the paths you might take during the course of your project.

16. Risk Probability Impact
Server hardware failure 15% Costs $300 for maintenance
A dependent coding module is
completed early
8%
Saves 2 days of work and an overall
$500 in cost
Procurement stuck at customs 10%
Can cost up to $100 for additional
paperwork
To begin with, you will calculate the Expected Monetary Value (EMV) for each risk,
Risk 1: 15% x $300 = $45 (-$45)
Risk 2: 8% x $500 = $40
Risk 3: 10% x $100 = $10 (-$10)
Now add all these values for total EMV
(-45) + 40 + (-10) = -15
Comment: This $15 is the extra money that you need to add to your budget to account for
all the project risks.
QUESTION
Solution:

17. Risk Probability Cost Impact EMV
A (Threat) 20% $100,000 -$20,000
B (Opportunity) 40% ($10,000) +($4,000)
C (Threat) 30% $50,000 -$15,000
Total EMV -$31,000
02

19. Decision Tree Analysis