Qualitative versus Quantitative Risk Analysis: Topics to Learn for the Project Management Professional (PMP) Exam

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Managing risk is a crucial aspect of managing projects. It is wise to anticipate multiple questions on the exam about project risk management and the processes from the risk knowledge area within A Guide to the Project Management Body of Knowledge (PMBOK Guide). Two of those processes that are commonly confused are Perform Qualitative Risk Analysis and Perform Quantitative Risk Analysis. For exam success, it is vital to understand the differences between these two processes. 

Project risk management involves:

  1. Planning the approach to risk management for the project 
  2. Identifying the risks to the project, including both negative risks (threats) and positive risks (opportunities) 
  3. Analyzing the identified risks, qualitatively and perhaps quantitatively 
  4. Planning and implementing the risk responses 
  5. Monitoring risk throughout the project 

Table of Contents


Perform Qualitative Risk Analysis 

All risks that have been identified on the project will be qualitatively analyzed. This analysis is performed on both threats and opportunities to assess and establish the priority of the risks, as well as determine the need for possible quantitative analysis and risk responses. 

A qualitative risk analysis involves subjectively assessing the probability, or likelihood, the risk event will occur as well as the impact, or effect, if it does occur. The probability and impact scales are numerical scales that are agreed-upon and documented in the risk management plan. 

For example, the probability may be assessed on a 0 to 1 scale, where 0.3 would correspond to a 30% probability. The impact may be assessed on a 0 to 1, 1 to 5, 1 to 10, or another agreed-upon scale. Multiplying the probability score by the impact score will return the individual risk score. For example, a risk is assessed as a 0.2 probability and an impact score of 4. The overall risk score would 0.8. It is the risk scores that allow the risks to be prioritized, with the highest rated risks being considered for quantitative analysis and risk response planning. 

Because a qualitative analysis is subjective, the biases, attitudes, and opinions of the assessors should be considered. However, having documented criteria that correspond to the impact level can assist with minimizing the subjectivity of the evaluation. 

Perform Quantitative Risk Analysis 

While all risks are evaluated through a qualitative risk analysis, only the highest priority risks will be analyzed quantitatively. While a qualitative analysis is a subjective numerical scale, a quantitative analysis, in contrast, assesses the project risk impact in terms of dollars and/or time. For example, qualitatively, the risk impact may have been assessed as a "3," whereas quantitatively, the risk is assessed as having an impact of $3,000 or an impact of a 20-day delay. 

Quantitative analyses are dependent upon high-quality data, fully loaded project models, and possibly high-end tools and software. Therefore, it is not typical to perform a quantitative analysis on all risks, but instead, it is performed on a subset of risks, such as those deemed to be the most impactful. 

Unlike a qualitative analysis that is relatively quick and easy to perform, a quantitative analysis is typically more time-consuming. Techniques used to perform a quantitative analysis include Monte Carlo simulations, decision tree and expected monetary value (EMV) analyses, and sensitivity analyses. 

In Summary 

The perform qualitative risk analysis and perform quantitative risk analysis are both processes within the PMBOK Guide, 6th Edition risk management knowledge area. A qualitative analysis assesses all risks that have been identified, is subjective, quick and easy to perform, and prioritizes the risks for further action by assessing the probability of the risk occurring and the numerical assessment of the impact if it does occur. 

A quantitative analysis, on the other hand, is more time-consuming, requires good data and robust tools, and is only applied to those risks that have been prioritized through a qualitative risk analysis. In a quantitative risk analysis, the impact is evaluated in terms of financial and/or schedule impact, not merely a numerical scale. 

Project Management Professional (PMP), A Guide to the Project Management Body of Knowledge (PMBOK Guide), "PMP," "PMBOK" are registered marks of the Project Management Institute, Inc. 

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