Prioritizing Project Risks

introduction

Hello, fellow project managers! I am sure you understand that risk management is an essential aspect of project management. Within the risk management, the qualitative risk analysis procedure holds paramount importance. It includes evaluating how likely and how much of an impact the identified risks might have in order to prioritize them. In this blog post, we will explore the process of qualitative risk analysis, focusing on two key techniques: utilizing probability and impact matrices to compute risk factors and managing the top ten risk item. We'll also discuss the significance of this analysis in ensuring the success of a project!

Conducting Qualitative Assessment of Project Risks

Qualitative risk analysis involves prioritizing risks according to their probability of happening and their potential impact on the project. Kathy Schwalbe [1] states that it helps project managers identify and focus on the most critical risks, as it's impractical to address all potential risks comprehensively. This analysis is a fundamental part of project risk management, making certain that the team is well-informed about the most critical risks and has established strategies to manage them throughout the project's duration.

Now, let's talk more about the two key techniques of qualitative risk analysis.

Utilizing Probability and Impact Matrices to Compute Risk Factors

The probability/impact matrix stands as one of the principal instruments for qualitative risk analysis. This matrix enables project teams to visualize how likely it is for risks to materialize and the impact they could potentially exert on the project. Kathy Schwalbe [1] highlights that teams can effectively prioritize and focus their risk management efforts by categorizing risks into high, medium, or low probability and impact.

Here's how it works:

• Risk Identification: Project stakeholders identify potential risks for the project, both positive and negative.

• Probability and Impact Assessment: Each risk is assessed for its probability of occurrence and the impact it would have on the project if it materializes. Risks are categorized as high, medium, or low for both probability and impact.

• Creating the Matrix: The project manager compiles the data in a probability/impact matrix. The matrix helps visualize the relative risk levels, making it easier to identify critical risks.

• Focus on High-Risk Areas: Project teams direct their attention to those risks located in the sections of the probability/impact matrix categorized as high. These are the risks with both high probability and high impact, making them the most concerning.

By using this technique, teams gain a clearer understanding of which risks pose the most significant threat to the project's success. This approach also facilitates discussions on how to respond to these risks, a topic we'll cover in more detail in the next section.

For a more advanced analysis, the U.S. Defense Systems Management College (DSMC) devised risk factors that serve as a comprehensive representation of the risks associated with events. These factors are calculated by combining the probability of occurrence and the outcomes it could bring to the project if the risk event occurs. This approach provides a stronger argument for risk prioritization, considering not only probability and impact but also the unique nature of the project.

Managing the Top Ten Risk Item

Another valuable method within the qualitative risk analysis is the managing the top ten risk items. It focuses on maintaining awareness of risks throughout the project's lifecycle and monitoring their status. According to Elizabeth Harrin [2], The process involves periodic reviews of the project's top ten risk items, which are selected based on their ranking, history, and progress in resolution.

Here's how it works:

• Selection of Top Ten Risks: The project team and, in some cases, the customer, identify and rank the top ten risks with the highest priority.

• Review Meetings: Periodic review meetings are held to discuss the current status of these top ten risks. This includes their ranking, changes in ranking over time, and progress made in addressing them.

• Customer Involvement: Involving the customer in these reviews can help the project team consider alternative strategies for risk mitigation and build confidence in the team's risk management capabilities.

• Outputs: The primary outcome of this technique results in the revision of the risk register, which includes ranking and risk scores. Additionally, it highlights risks that need immediate attention and those that can be included in a watch list.

By using the Top Ten Risk Item Tracking method, project teams ensure that they remain vigilant about the most critical risks and can adapt their risk response strategies as needed. 

Conclusion

Qualitative risk analysis plays a pivotal role in project risk management, helping teams prioritize and address potential risks effectively. By utilizing probability and impact matrices to compute risk factors and managing the top ten risk item, project managers can make informed decisions about which risks require immediate attention. The iterative nature of qualitative risk analysis ensures that the project team remains proactive in managing risks throughout the project's lifecycle. This approach not only enhances the project's chances of success but also instills confidence in stakeholders that risks are being adequately addressed. Until next time!

References

[1] Schwalbe, Kathy. Information Technology Project Management, 9th Edition.

[2] Harrin, Elizabeth. “Qualitative Risk Analysis: Process Overview”
      projectmanagement.com, link to the article.

Graphic References

[Figure 1] Illustration of project risk management, link to the graphic.

[Figure 2] Sample probability/impact matrix
  Page 482, Schwalbe, Kathy. Information Technology Project Management, 9th Edition.

[Figure 3] Diagram illustrating technologies classified as high, medium, and low risk
  Page 483, Schwalbe, Kathy. Information Technology Project Management, 9th Edition.

[Table 1] Example of top ten risk item tracking
Page 484, Schwalbe, Kathy. Information Technology Project Management, 9th Edition.