Risks can impact various aspects of a project, such as duration, scope, cost, income, safety, quality, and technology. Understanding and quantifying these risks can help project managers make informed decisions and mitigate potential issues.

Risk Assignment and Impact

When assigning risks to tasks and resources, it is essential to select the type of risk impact. For example, this table illustrates how risk assignments that include non-schedule impacts might appear. Each category of risk has its own impact type and numerical scale, allowing for a more precise quantification of the risk impact.

For instance, a 20% probability of a fixed delay in duration and scope might result in a 3-day delay. Similarly, a 5% probability of a fixed cost increase could lead to an additional $200 in costs. By assigning numerical values to these impacts, project managers can better understand the potential consequences of each risk.

Quantitative Risk Analysis

To perform a quantitative risk analysis, project managers can use tools like Monte Carlo simulations. These simulations help quantify the impact of each risk category and rank them accordingly. For example, this table shows the results of Monte Carlo simulations for the safety risk category. By calculating the correlation between risk impact and the total impact for all risks within the same category, project managers can determine which risks have the highest impact.

Here is a sample schedule. In this example, we assigned the same risk to two different tasks, and second risk to the third task. We use numerical scales for risk impact; however, it can be assigned using a label which represents an underlying value. Our goal is to rank the risk using quantitative analysis for a single risk category and the for all the risk categories.

Calculating Risk Scores

After calculating the impact for each risk category, project managers should multiply the impact by the probability to ascertain the risk score. This process allows for a comprehensive ranking of all risks, helping project managers prioritize their mitigation efforts.

Integrating the Risk Analysis

It is important to note that if we have impacts for schedule related risk categories (duration or cost), they can also be included as part of the calculation of risk total impact, even though the impacts are calculated using a different method. The total impact for all risk categories is a very important signal for decision making. The questions we sometimes get asked are if we have a risk that has a serious impact, but only on one category shouldn’t it have priority. This is a common approach, where risks are not prioritized by their overall impact across all categories, but by their single highest impact on any single category. While this may have some merit, we believe that when set up properly, this integrated risk approach provides the best insight on how to manage risks. In many instances, if you have a risk that impacts may risk categories, but only specifically mitigate one impact, it will also act to minimize the impact on other risk categories. Using our zoo example, when they repaired the elephant enclosure, it addressed potential safety, legal, and cost-related problems all at the same time. Therefore, risks with highest overall risk score should have the highest priority.

Conclusions

In summary, understanding and quantifying non-schedule risks is essential for effective project management. By using quantitative analysis techniques, project managers can make informed decisions and better manage potential risks.