5/6/2016

Risk Assessment & Analysis

Dr. Hossam Mohamed Toma

Risk Management

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Risk Assessment

• Risk assessment is the overall process of risk analysis

and risk evaluation.

• Its purpose is to develop agreed priorities for the identified

risks.

Qualitative Risk Analysis

• Qualitative Risk Analysis assesses the impact and

likelihood of the identified risks and develops prioritized
lists of these risks for further analysis or direct mitigation.

• The project team assesses each identified risk for its

probability of occurrence and its impact on project
objectives.

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Qualitative Risk Analysis

Qualitative Risk Analysis can be used by project teams:

• As an initial screening or review of project risks

• When a quick assessment is desired

• As the preferred approach for some simpler and smaller

projects where robust and/or lengthy quantitative analysis is
not necessary.

Qualitative Risk Analysis

• Risk identification results in the generation of a risk register.

• The risk register can be sizeable

• It is necessary to evaluate and prioritize the risk events

identified in the risk register.

• Prioritizing risks that present the highest potential for

significantly affecting project objectives gives Project
Managers the information necessary to focus project
resources.

How to Perform Qualitative Risk

Analysis
• Once a risk is identified, including a thorough description of
the risk and risk triggers, it can be characterized in terms of
probability of occurrence and the consequence if it does
occur.

1. Gather the project team and appropriate persons to discuss

project risk. Establish which of the qualitative risk matrices
you intend to use, and define the terms you plan to use
(Very High, High, Medium, Low, etc.).

2. Review the risk information from the risk identification

step.

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Defining Terms of the Matrix

How to Perform Qualitative Risk

Analysis

3. Discuss the risk with the group.

4. Evaluate the likelihood of the risk occurring by asking

the group, “How likely is it that this risk will occur?”
Record the result that the group agrees on.

How to Perform Qualitative Risk

Analysis

5. Evaluate the consequences if the risk does occur by

asking the group, “What will be the impacts if this risk
does occur?” Record the result that the group agrees on.

6. Prioritize the risks based on the results of the

qualitative analysis. If it is desirable, the risks can also be
grouped by category (e.g., Environmental, Structures/
Geotech) and ranked within each category.

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Determination of the Probability &

Impact of Risks

Defining Risks on the Qualitative Risk

Matrix

Example 2 (Probability Scale)

Risk Probability Ranking

Ranking Probability of Risk Event
5 80–99%
4 60–79%
3 40–59%
2 20–39%
1 1–19%

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Example 2 (Impact Scale)

Risk Impact Ranking

Ranking Impact of Risk Event
5 16
4 8
3 4
2 2
1 1

Determination of the Risk Matrix Scale

Translate Score to Risk Rank

Score Risk
1–6 Low
7 – 14 Moderate

15 – ++ High

Qualitative Risk Matrix

Time, Cost, and Scope Objectives
Large Aversion to High & Very High Impacts
Probability
5 5 10 20 40 80
4 4 8 16 32 64
3 3 6 12 24 48
2 2 4 8 16 32
1 1 2 4 8 16
1 2 4 8 16
Impact

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Evaluating Impact of a Risk on Major Project Objectives

Qualitative
Impact 1 Risk
2 Matrix
4 8 16

Time Insignificant Delivery plan Delivery plan Delivery plan Delivery plan
schedule milestone milestone milestone delay milestone delay
slippage delay within delay of one of more than outside fiscal
quarter quarter one quarter year
Cost Insignificant <5% cost 5–10% cost 10–20% cost >20% cost
Objective

cost increase increase increase increase increase

Scope Scope decrease Changes in Changes in Sponsor does Scope does not
is barely project limits project limits not agree that meet purpose
noticeable or features or features scope meets the and need
with <5% cost with 5–10% purpose and
increase cost increase need

Quantitative Risk Analysis

• Quantitative Risk Analysis numerically estimates the probability
that a project will meet its cost and time objectives. Quantitative
analysis is based on a simultaneous evaluation of the impacts of
all identified and quantified risks.

• Quantitative techniques, such as Monte Carlo simulation, can be

a powerful tool for analysis of project risk and uncertainty. This
technique provides project forecasts with an overall outcome
variance for estimated project cost and schedule. Probability
theory allows us to look into the future and predict possible
outcomes.

Quantitative Risk Analysis (Example)

• In a construction project the unit price and estimated for

excavation is depending on the type of the excavated soil as
shown in the following table.

Soil Type Unit Price (L.E.) Time (minutes)

Very dry soil 2.6 12
Fairly dry 3.0 15
Wet 6.0 25
Very wet 8.0 35

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Quantitative Risk Analysis (Example)

• Assess the risk of changing weather on the unit price if case the
probability of the change of the weather is as following:

Weather Probability
Dry weather 10%
Showers 20%
Rains 50%
Heavy rains 20%

Quantitative Risk Analysis (Example)

• Probability of the excavated soil will be as following:

Excavated soil Probability

Very dry soil 10%

Fairly dry 20%

Wet 50%

Very wet 20%

Quantitative Risk Analysis (Example)

• Probability of the cost and time will be as following:

Excavated soil Probable cost Probable time

Very dry soil 0.1 * 2.6 = 0.26 0.1 * 12 = 1.2

Fairly dry 0.2 * 3.0 = 0.60 0.2 * 15 = 3.0

Wet 0.5 * 6.0 = 3.00 0.5 * 25 = 12.5

Very wet 0.2 * 8.0 = 1.60 0.2 * 35 = 7.0

Total probable cost/time 5.46 23.7

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Risk Response
Planning

Risk Response Planning

• Risk response planning focuses on the high-risk items
evaluated in the qualitative and/or quantitative risk
analysis

• It identifies and assigns parties to take responsibility for

each risk response

• This process ensures that each risk requiring a response

has an owner

Risk Response Planning

• The project manager and risk team identify which
strategy is best for each risk

• These strategies and actions include:

Avoidance
Transference
Mitigation
Acceptance

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Risk Avoidance
• The team changes the project plan to eliminate the risk
or to protect the project objectives from its impact.

• The team might achieve this by changing scope, adding

time, or adding resources

Risk Transference

• The team transfers the financial impact of risk by

contracting out some aspect of the work.

Risk Mitigation
• The team seeks to reduce the probability or
consequences of a risk event to an acceptable threshold

• They accomplish this via many different means that are

specific to the project and the risk

• Mitigation steps, although costly and time-consuming,

may still be preferable to going forward with the
unmitigated risk

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Risk Acceptance
• The project manager and the project team decide to
accept certain risks.

• They do not change the project plan to deal with a risk,

or identify any response strategy other than agreeing to
address the risk if and when it occurs.

Risk Monitoring &

Control

Risk Monitoring & Control

• Risk monitoring and control keeps track of the identified
risks, residual risks, and new risks.

• It also ensures the execution of risk response plans, and

evaluates their effectiveness.

• Risk monitoring and control continues for the life of the

project. The list of project risks changes as the project
matures, new risks develop, or anticipated risks
disappear.

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Thank You

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