Because projects are designed to create something new, risks are inevitable. The success of a project often hinges on the ability to identify, assess, and manage risks efficiently. Qualitative risk analysis enables project managers to understand the nature of uncertainties they face and to prioritize them based on their potential impact. This article delves into what qualitative risk analysis is, how to conduct it, when it should be performed, and why it's essential for project success.

What is Qualitative Risk Analysis?

Qualitative risk analysis is a process of assessing risks based on their probability of occurrence and the impact they may have on project objectives. It's a subjective assessment that involves the use of expert judgment and experience rather than quantitative data. The goal is to identify which risks are most critical and warrant further analysis or immediate action.

How to Conduct Qualitative Risk Analysis

1. Identify Risks

The first step is to gather a comprehensive list of potential risks that could affect the project. This can be achieved through brainstorming sessions, interviews with stakeholders, review of historical data, and analysis of project documents. Learn more on how to identify risks.

2. Develop Risk Assessment Criteria

Establish criteria for both the likelihood of risks occurring and their impact on project objectives. These criteria should be tailored to the specific context of the project and agreed upon by key stakeholders.

An example of a 3 by 3 Risk Assessment Matrix using High, Medium and Low. See example 3 by 3 Risk Assessment Matrix with free download.

3. Assess Risks

Using the established criteria, assess each identified risk for its probability of occurrence and potential impact. This step often involves discussions among project team members and stakeholders to leverage their collective knowledge and experience. Learn more about how to assess risks.

The image above shows an example of a risk that has been assessed by Chance of occurance and Impact giving a level of Criticality or Red, Amber, Green status. For example, a risk with a 'High' chance of occurance and a 'High' impact would have a criticality of Red. A risk with a low low assessment would have a criticality of Green.

4. Rank Risks

Based on the assessment, risks are ranked to determine their priority. This helps in focusing attention and resources on the risks that pose the greatest threat or opportunity to the project.

5. Assign Ownership

For each risk, assign an owner who will be responsible for monitoring the risk and implementing response strategies.

6. Document and Communicate

The findings of the qualitative risk analysis should be documented in a risk register. This document should be communicated to all relevant stakeholders to ensure a shared understanding of the project's risk landscape.

The image above shows an example of a completed Risk Register.

It contains the following columns:

• ID - Unique reference or number for the risk.
• Date raised - the date the risk was raised or identified.
• Risk description - this is as detailed a description of the risk as possible. It helps to write risks using a format similar to: 'if x happens it will mean/cause y'
• Likelihood and Impact - rated either as High, Medium and Low. Conditional formatting is used to fill the cell with Red for High, Orange for Medium and Green for Low.
• Severity - Depending on the Likelihood and Impact rating the risk severity will be set.
• Owner - The person responsible for managing the risk. They might not be the person who takes mitigating actions, but they will monitor progress and report to the Project Manager or Project Board.
• Mitigating action(s) - Provide details of how you plan to treat the risk. There are several ways that you can respond to a risk see Risk Responses and Risk Mitigationfor more detail.

Download this Risk Register template in Excel..

When to Conduct Qualitative Risk Analysis

Qualitative risk analysis should be performed at the planning stage of a project and revisited regularly throughout its lifecycle. Conducting it early allows for proactive risk management, while periodic reassessment ensures that new risks are identified and analyzed as the project evolves.

Examples of Risk Assessment Criteria

Risk assessment criteria are standards or parameters used to evaluate and prioritize risks based on their potential impact on project objectives, organizational operations, or other specific contexts. These criteria are crucial for making informed decisions about risk management strategies. Here are a few examples of commonly used risk assessment criteria:

1. Severity of Impact

High (Catastrophic): Could result in severe financial loss, significant project delays, failure to achieve critical objectives, or major harm to reputation.

Medium (Major): Might cause moderate financial loss, noticeable delays, partial failure to meet objectives, or some damage to reputation.

Low (Minor): May lead to minimal financial loss, slight delays, negligible impact on objectives, or minor harm to reputation.

2. Likelihood of Occurrence

Very Likely: The risk is almost certain to occur during the project or operational lifecycle.

Likely: There is a high probability of the risk occurring.

Unlikely: The risk has a low probability of occurrence.

Rare: The risk is very unlikely to happen.

3. Detectability

Easy to Detect: The risk or its impacts are easy to identify before they occur.

Moderate to Detect: Requires some effort or systems in place to detect the risk or its impacts.

Difficult to Detect: The risk or its impacts are hard to identify without specific knowledge, tools, or processes.

4. Speed of Onset

Immediate: The risk can materialize and impact the project or operations instantly or with little warning.

Gradual: The risk develops or materializes over a longer period, providing some time for detection and response.

5. Reversibility

Reversible: Actions can be taken to reverse the impact of the risk once it has occurred.

Irreversible: Once the risk occurs, its impacts cannot be undone, and recovery may be difficult or impossible.

6. Controllability

High Control: The organization or project team has significant control over whether the risk occurs and its impacts.

Moderate Control: Some measures can influence the occurrence and impact of the risk but not fully control it.

Low Control: The organization or project team has little to no control over the risk and its impacts.

7. Cost of Mitigation

High Cost: The financial resources required to mitigate the risk are significant.

Moderate Cost: The resources required are reasonable and manageable within the project or operational budget.

Low Cost: Minimal resources are needed to mitigate the risk effectively.

8. Regulatory and Compliance Impact

High: Non-compliance or failure to manage the risk could result in legal penalties, license revocation, or significant regulatory fines.

Medium: May lead to regulatory scrutiny, temporary sanctions, or moderate fines.

Low: Minor or no regulatory consequences.

These risk assessment criteria help organizations prioritize risks and allocate resources effectively to those that pose the greatest threat or opportunity. The specific criteria and scales used can vary depending on the nature of the project, industry standards, and organizational risk tolerance.

Why You Should Use Qualitative Risk Analysis

Prioritization of Risks: It helps in identifying and prioritizing risks based on their severity, enabling project managers to focus on the most significant threats and opportunities.

Informed Decision Making: By understanding the qualitative aspects of risks, project managers can make better-informed decisions regarding risk response strategies.

Resource Optimization: It enables efficient allocation of resources to areas where they are needed most, enhancing the overall efficiency of risk management efforts.

Stakeholder Confidence: A systematic approach to risk analysis and management can increase stakeholders' confidence in the project's success.

Enhanced Project Performance: Proactive risk management based on qualitative analysis can lead to reduced uncertainties and improved project performance.

Qualitative risk analysis is an indispensable part of risk management. By identifying, assessing, and prioritizing risks based on their impact and likelihood, project managers can take proactive steps to mitigate potential threats and capitalize on opportunities. Conducting qualitative risk analysis early and regularly throughout the project lifecycle is key to ensuring that risks are managed effectively, ultimately contributing to the success of the project.