Risk management - Qualitative method
Qualitative method
Qualitative methods of risk assessment try to compare ranges in a simple fashion. Specific values are not given to the impacts. Methods include a simple scoring system and the use of high / medium / low.
Even so, qualitative methods have numerous advantages over the issue based method but there are a few pitfalls in the interpretation of the data.
Risk analysis is based upon some form of set question system that tries to attribute a particular value to the impact if the risk materialises. Very simplistically it could be:
Set up a series of questions. If the answer is YES score as shown, if NO score ZERO.
| Question 1 | Score = 1 |
| Question 2 | Score = 2 |
| Question 3 | Score = 3 |
Alternatively, a series of questions could be set that require a degree of interpretation and subjectivity to choose a score within a possible range.
| Question 1 | Score = range 1 to 5 |
| Question 2 | Score = range 1 to 5 |
| Question 3 | Score = range 1 to 5 |
The choice of 1 might be LOW RISK and 5 HIGH RISK.
Naturally, the questions that you attribute to the task could be quite detailed in their description of the level of risk.
Eventually, for a given task, the total score is calculated. For example, if the total score is 23 it could be interpreted as:
| Consider LOW risk | Score = less than 20 |
| Consider MEDIUM risk | Score = 20 to 30 |
| Consider HIGH risk | Score = 30 to 40 |
In this case the risk could be considered to be MEDIUM. What MEDIUM means in practice would require some agreement within the project team.
The major problem with the ‘score’ based system is that it depends on the individuals interpretation of the scoring system. It can be too subjective. What does the score really mean? This is another problem in that people may give little value to the scores or conversely give them much more weight than they deserve.
In addition, there may be some confusion with the LIKELIHOOD of the risk occurring and its IMPACT on the project. The system could show a high impact but have virtually no chance of occurring and may therefore not be a problem. You must be aware of this when using these methods.
You could do without the scoring and just put a risk impact in a bracket of LOW / MEDIUM / HIGH. This is even simpler. These should be defined.
The total risk of the project can be confused with the total score achieved by adding up the individual scores. This is a very simplistic view and is another drawback of this approach. The risk of individual tasks is not additive. Many tasks depend upon others in the schedule.
So, whilst the simple nature of this method may have its uses there are still disadvantages.
In summary:
- These methods try simply to determine the size of the effect
- Based upon threshold:
- less than a particular value (safe)
- in between (medium risk)
- higher than a particular value (high risk)
- Can be seen as meaningless or objective
- Can confuse likelihood with impact and obscure priorities - may miss new high risk activities
- Risk is not additive - ignores task relationships