6th Edition PMBOK® Guide: Process 11.3 Perform Quantitative Risk Analysis: Inputs


Qualitative risk analysis and quantitative risk analysis are different in the following ways.

  • Qualitative risk analysis is based on the subjective impression of stakeholders regarding the probability and impact of individual project risks.   Quantitative risk analysis, on the other hand is based on the availability of high-quality objective data about the probability of those risks and objective data regarding their impact on the project baseline for scope, schedule, and cost.
  • Quantitative risk analysis is appropriate for large or complex projects, or those that are strategically important or are required by key stakeholders or contractual requirements.
  • Qualitative risk analysis focuses on individual project risks, but quantitative risk analysis evaluates the aggregated effect of these risks on the overall project outcome.    The overall goal is to be able to specify the level of confidence in being able to achieve the stated basic constraints of scope, time and cost.

This post deals with the inputs to this process.

11.4.1  Perform Quantitative Risk Analysis:   Inputs

11.4.1.1  Project Management Plan

The components of the project management plan that are used as inputs consist of a) the risk management plan component and the baselines for the three basic constraints of scope, time and cost.

  • Risk management–the risk management plan should indicate whether the project is of sufficient size and complexity to warrant the time, cost and human energy spent in doing a quantitative risk analysis.
  • Scope, schedule and cost baseline–these baselines give the starting point for evaluating individual project risks and other sources of uncertainty.   For example, any activity identified in the scope baseline component of the Work Breakdown Structure as being on the critical path should automatically be scrutinized as being higher risk because any delay in that activity will cause a delay in the entire project.

11.4.1.2 Project Documents

The PMBOK® Guide lists these in alphabetical order, but I am listing them below according to their category to make the list easier to comprehend.

Documents related to basic constraints and assumptions

  • Assumption log–assumptions that pose a risk to project objectives should be examined as well as the effect of basic constraints of the scope, time and cost
  • Milestone list–these define the schedule targets against which the results of a quantitative schedule risk analysis are compared (for example, a finding that there is 80% confidence in achieving the project deadline)
  • Resource requirements–the required resources (both human resources and physical resources) can provide a starting point from which variability is evaluated.   For example, the delivery date of required key physical resources or the availability dates for key human resources would create risks to the project objectives if they are not adhered to.

Documents related to estimates

  • Basis of estimates–this provides background on the estimate’s accuracy, methodology, and source of information.
  • Cost estimates, duration estimates–three-point estimates which give the most likely estimate, as well as the optimistic and pessimistic estimates based on the triggering of certain risks, provide a starting point for the modeling of qualitative risk analysis.

Documents related to forecasts

  • Cost forecast, schedule forecast–cost and schedule forecasts using earned value management such as the Estimate to Complete (ETC), the Budget at Completion (BAC), and the To-Complete Performance Index (TCPI) may be used in conjunction with quantitative risk analysis to determine the confidence level of achieving those targets.

Documents related to risks

  • Risk register–this will include details of individual project risks to be used as input for the quantitative risk analysis done in this process.
  • Risk report–this risk report describes sources of overall project risk (which can be found in the project charter)

11.4.1.3  Enterprise Environmental Factors

  • Industry studies of similar projects
  • Published material, such as commercial risk databases or checklists.

11.4.1.5  Organizational Process Assets

  • Information from previous similar projects done by the organization.

The next post will cover the tools and techniques of quantitative risk analysis, but these are so numerous and some of them so complex that it will take a couple of posts to describe them all…

 

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