Comparison of Qualitative and Quantitative Risk Assessment

Comparison of Qualitative and Quantitative Risk Assessment Risk assessment is a term which is used to describe the overall process or method to identify the hazard or the risk factor which may cause harm or have the potential to cause harm, analysis and evaluation of the risk which is associated with that hazard and it also include remedial steps by identifying the ways to eliminate the hazard, or control the risk where such hazard cannot be eliminated in totality. There are two types of risk assessment w hich encompass qualitative and quantitative risk assessment. Qualitative risk assessment is a process of assessing the likelihood of occurring of a risk and the impact it would have on the project if such risk happens. This risk observes three functions wh ich are as under: (a) Prioritising risk according to probability and impact; (b) Identification of main areas of risk exposure; (c) Improve the understanding of project risks. Qualitative risk analysis is all about prioritizing the risk on the basis of their probabili ty and impact which helps the manager to focus on devising the treatment for the most significant risk. It helps the manager understanding of risk. Quantitative risk analysis is the numeric estimate of the overall effect of risk on the project such as cost and schedule activities. These results helps to understand the likelihood of success of a project and helps in development of contingency reserves. The major difference between the two analysis has been highlighted as under: (a) Qualitative risk involves iden tification of threats or opportunities, how these are likely to happen and the potential impact that may occur if they do happen. The results are shown as Probability/Impact ranking matrix. They categorise the risk either by source or by effect. Under quan titative risk analysis, numerical values and verifiable data are used. Further, qualitative risk analysis operates in a more generalised big picture space.; (b) Quantitative risk analysis uses data for producing a value which can measure the acceptability of r isk event outcome; (c) Qualitative risk analysis happen prior to quantitative risk analysis. Advantage and disadvantage of qualitative risk analysis: Advantage (a) Easy presentation: As the results can be presented graphically; (b) Methods of assessment are simple as it does not rely on complicated tools or software; (c) There is no need for determining frequency; (d) There is no need for identification of impact on cost or schedule. Disadvantage (a) There is no combined risk evaluation or cost analysis; (b) There is lack of differentiation within risk categories. Advantage and disadvantage of quantitative risk analysis: Advantage (a) Make cost effective decisions along with controlling risk of the project; (b) Allows for definition of consequence of incidents occurrence in a quantit ative manner; (c) Helps to obtain a better image of risk; (d) Realisation of cost and benefit analysis for selection of project; Disadvantage (a) Depends too much on scope and accuracy of defined measurement scale; (b) Analysis result may not be precise and at sometimes b e confusing; (c) Enriched with qualitative description.