Identifying risks is a never-ending task, although some are more likely to occur than others. In addition, certain hazards will inflict a substantial amount of damage to your enterprise, while others will barely make a dent. Therefore, we wish to concentrate our efforts on events that are not only probable but also have the most impact on us. Qualitative risk analysis is a method used to evaluate and prioritize potential risks in a project or business.
It is a rapid and cost-effective means of establishing priorities and lays the foundation for performing quantitative risk analysis if required. This is a subjective assessment as they are based on perceptions of risk by the project team and other stakeholders
To use qualitative risk analysis, the first step is to identify potential risks. This can be done through brainstorming sessions, reviewing project plans and documents, and consulting experts. Once risks have been identified, they can be evaluated using a risk matrix or other tool to determine their likelihood and impact. This information can then be used to prioritize risks and develop strategies to mitigate or manage them.
Tools for Performing Qualitative Risk Analysis
There are several tools that can be used for qualitative risk analysis, such as:
- Risk matrix: a table that plots risks according to their likelihood and impact.
- Probability and impact matrix: a tool that uses a numerical scale to rate the likelihood and impact of a risk.
An example of a construction project.
- Identifying potential risks such as delays in receiving building permits, inclement weather, and labor strikes.
- Using a risk matrix to evaluate the likelihood and impact of each risk.
- Prioritizing risks based on their overall risk score and developing strategies to mitigate or manage them, such as applying for building permits well in advance and having contingency plans for bad weather and labor strikes.
Note that qualitative risk analysis is a first step and it’s important to complement it with quantitative risk analysis if necessary that will give more specific probabilities and values for likelihood and impact. A good way to figure out whether a risk is likely is to look at lessons learned and see if it happened before