Qualitative risk analysis involves identifying the consequence and likelihood of risks on the project objectives. It also enables ranking of risks for prioritization of resources to mitigate the risks. Qualitative risk analysis is a cost-effective and time-saving method for analyzing risks.

Key inputs required to perform qualitative risk analysis are:

• Historical information and lessons learned from past projects

• Project scope statement

• Risk management plan

• Risk register

Various tools and techniques are available for performing qualitative risk analysis. These are listed below:

Risk probability and impact assessment: This technique helps in evaluating the likelihood and consequence of a risk on the project. Risk likelihood is the possibility that the risk will occur and it is primarily accomplished by using expert judgment. The likelihood and consequence of risks are assessed in interviews or meetings comprising people having experience in dealing with risks on similar projects.

Probability and impact matrix: Risks are further assessed and ranked using the likelihood/ consequence matrix. This matrix helps in rating the risks as high, moderate, and low. The values of the risks determine the risk mitigation planning for the risks. Risks with high likelihood and high consequence need to be addressed as a priority.

Data precision ranking: This technique involves analyzing the quality of data gathered for evaluating the risk. The parameters needed for analyzing data are:

• Quality of data used
• Availability of data regarding risks
• Risk understanding
• Reliability and integrity of the risk data
• Accuracy of the data

Risk categorization: This technique involves categorizing risks by source, areas of project affected, or project phase affected. This categorization helps in devising effective risk responses.

Risk urgency assessment: This technique involves analyzing the urgency of addressing a risk.

The key benefit of performing qualitative risk analysis is that it helps in deriving a relative ranking of project risks. It is specifically helpful for an initial screening of risks when a quick assessment is needed.

PM Pathway’s risk register helps to identify, record, rank (likelihood/consequence) and mitigate project risks. In conjunction with our other project risk management tools you can plan and run your own risk management workshop.

Risk identification involves identifying and documenting all the risks that might impact the project. Risk identification is typically done by project team members, key stakeholders, and technical experts. Risk management is an ongoing process as new risks can evolve at any stage of the project life cycle.

The following tools and techniques are used for identifying risks:

Expert Judgement: Experts with past experience of similar projects can help identify risks.

Documentation Reviews: Reviewing documents such as project plans, assumptions, and historical information from previous projects helps in identifying risks.

Information Gathering Techniques: Various techniques such as brainstorming, Delphi technique, and root cause analysis are used for gathering information about risks. These techniques are detailed below:

• Brainstorming: Brainstorming involves gathering experts, team members, and other people who can contribute in identifying risks in a room with the purpose of formulating an exhaustive list of risks for the project. Risks are also categorized and defined in this session.

• Delphi technique: This technique is quite similar to brainstorming with the exception that the participants need not be located at the same place. They participate anonymously. In this technique, a questionnaire is sent to the participants. The responses are summarized and then sent again to the participants. This process is repeated till a consensus is reached. This technique helps in reaching consensus without the participants influencing each other’s opinion.

• Root cause analysis: This method involves analyzing the causes of project risks with the purpose of detailing the risk definition so as to formulate an appropriate response at a later stage.

Checklist Analysis: When working on projects of a similar nature over a period of time, it is helpful to compile a list of generic risks. In subsequent projects, it can be used as a checklist for identifying risks. However, care should be taken not to confine risk identification solely to checklists.

Assumption Analysis: It is always advisable to formulate a list of assumptions for every project. The validity of these assumptions can be used for identifying risks.

Diagraming Techniques: Various diagramming techniques such as cause and effect diagram, and flowcharts are used for identifying risks. The cause and effect diagrams are useful for identifying the effect of one risk on another. Flow charts are useful for identifying the sequence of events in a process and isolating the areas which are prone to risks.

SWOT Analysis: This technique involves evaluating the project using strength, weakness, opportunity, and threat as the parameters for analysis. The SWOT analysis is performed for the project taking the organizational perspective into consideration.

Risk identification might be done in the project planning stage but it is important to continuously define risks in detail as the project progresses.

PM Pathway’s risk register helps to identify, record, rank and mitigate project risks. In conjunction with our other project risk management tools you can plan and run your own risk management workshop.

Risk management involves identifying risks, analyzing the impact of risks, and subsequently devising a risk response plan. Quantitative risk analysis involves assigning numeric ratings to the identified risks to demarcate high and low value risks.

The basic purpose of performing a quantitative risk analysis includes deriving:

* A prioritized list of quantified risks;

* Quantified cost and time contingency reserves; and

* The probability of meeting cost and schedule requirements for the project.

For quantifying risks, the following details are required:

* The exhaustive list of risks;

* The tolerance limits of the stakeholder;

* The cost estimate for all the resources required to complete the project; and

* The time estimate for completing all the activities of the project.

Once the above listed details are available, Quantitative Risk Analysis can be performed using the following tools and techniques:

Assessing: This is a data gathering phase in which stakeholders and project team members met to discuss information about past project experiences and their relevance to the project risks. The information to be documented will depend on the kind of probability distribution that will subsequently be used for analyzing the results. This information can also be used for verifying the credibility of the analysis.

Valuing: The expected monetary value is calculated by multiplying the probability of occurrence of a risk event with the value of the risk event. If cost is a major governing factor for the project, then the risks with higher expected monetary value need to be addressed as a priority.

Simulation: While performing a simulation, a model of the system or process is used to derive the expected results. The Monte Carlo analysis can be used to quantify risks.

Decision Tree Analysis: The decision tree is a useful tool for choosing an option from various alternatives. It is used to explore different options and the outcome of selecting a specific option.

Sensitivity Analysis: This technique is used to determine the risks which are likely to have the highest impact on the project. In sensitivity analysis, the effect of each risk is examined while keeping all other uncertain elements at baseline values.

It is important to observe the trends which are likely to appear during Quantitative Risk Analysis. Monitoring risks gives the opportunity to perform further analysis of the risks that pose the maximum threat to the project and then devise an appropriate risk response plan and also to determine the effectiveness of risk mitigation strategies.

PM Pathway’s risk management tools are designed to facilitate the determination of project risk consequence levels, record project risks and mitigation strategies and determine residual project risk, all in an easy reporting format.

1. Requirement

2. Requisition

3. Tender

4. Evaluation

5. Contract Administration

6. Contract Closure

Each of the above listed stages of contract life cycle is detailed below.

Requirement: During this stage, the Scope of Work (SOW) is created. This document addresses specific project requirements, which in turn determine the need for the contract. Contract cost estimates are defined and coded to the project’s Work Breakdown Structure (WBS) and the budget for the contract is identified. The form of contract appropriate to the scope of work is also decided (i.e. lump sum design and construct, consultancy agreement, etc.).

Requisition: This stage involves further detailing of the contract objectives and tender documents are prepared. The evaluation criterion for assessment of tenders is also established during this phase. Certain examples of evaluation criteria are technical capability, overall cost, financial capacity and price.

Tender: During this stage, tender invitations are sent to suppliers/contractors to compete for the contract. This could involve making contact with selected tenderers or advertising an open tender process. The tenderers’ proposals are received as a result of the tender process.

Evaluation: During this stage, the proposals received are evaluated as per the evaluation criterion established during the requisition phase. Significant negotiation and discussions may be required with tenderers to normalize the pricing and conditions to enable a final comparative evaluation. Once a tenderer has been finalized, a contract is signed between the parties. The contract is a legally binding agreement between a contractor and a principal. After signing the contract, it needs to be administered to ensure that the project objectives are achieved.

Contract Administration: The contract administration process involves monitoring the contractor’s performance regularly to ensure that the project objectives are met and the contractual obligations are complied with. Contract administration is a detailed process, and includes activities such as:

* Managing the contract scope, including variation management (try our free variation form);

* Reporting contract progress to all the stakeholders;

* Managing payments to the contractors.

Contract Closure: During this stage the deliverables are formally accepted by the stakeholders, a written notice of acceptance is provided to the contractor and a certificate of completion is issued. In addition, a contractor/consultant review form should be completed to evaluate and record their performance for future work opportunities.

It is imperative to plan and execute each stage of the contract life cycle diligently to ensure that maximum benefits are accrued for the organization.

Whether you are undertaking a study phase or completing the execution of the project, whether you are completing the work in-house, outsourcing or providing project delivery services to a client, the fundamentals of the delivery of each phase must be included in the Project Charter.

In general, the purpose of a Project Charter is to:

* Advise the organisation of the initiation of a new project;

* Convey key information on this project;

* Give formal recognition and authority to the Project Manager; and

* Agree key project details between the Sponsor, Project Owner and Project Manager so that these provide direction for the planning phase.

It is the ‘contract’ for the delivery of the project between the project owners and the project manager, setting out timeframes, scope, risks, and the assumptions and constraints on which the assessment for measuring project success is based. It also formally assigns roles and accountability as well as setting the Project Manager’s authority.

PM Pathway offers a set of Project Initiation and Setup Templates providing the tools and templates for establishing your project/project phase. Each template and tool is also available individually to enhance, or fill gaps in, your existing processes. It is also available as part of the complete framework of project management templates for project delivery. Each template offers a cost effective way of incorporating tested and trusted processes into your organisation.

Regardless of your role on the project, given the value of a Project Charter, the benefits of having one in place from the start are clear!

We have products to suit the project management of projects of any size and across any discipline, with our key discipline-specific products separated out for convenience.

Feel free to try one of our free downloads and to browse through our products. For exceptional value take a look at our discipline specific Template Bundles or Project Management Template Solutions including, for a limited time, or Solution including forms of contract!

We would love to receive your feedback and hear your success stories, so stay in touch and check back regularly for project management updates and guidance. And remember to look out for our suite of project management procedures, to be released shortly, to fully complement our template solutions!

Kind Regards,

The PM Pathway Team