This article contains most of the important information you need to know about Perform Quantitative Risk analysis process in order to answer questions related to this topic in the PMI-RMP Exam, I recommend you review this type of articles 1 week before your exam date, all information mentioned are based on PMBOK Guide 5th edition , Practice Standard for Risk Management and Risk Management Tricks of the trade for Project Managers and PMI-RMP Exam Prep Guide , 2nd Edition by Rita Mulcahy ., ITTO refers to Inputs, Tools & Techniques and outputs.
This process is a part of Planning Process group and Risk Management Knowledge Area with the following ITTO’s
- Risk management Plan
- Risk Register
- Cost management Plan
- Schedule management Plan
- Organizational Process Assets
- Enterprise Environmental Factors
Tools & Techniques:
- Data Gathering and representation techniques
- Quantitative Risk Analysis and modeling
- Expert Judgment
- Project Document Updates
- The process provides a numerical estimate of the overall effect of a risk on the objectives of the project, based on current plans and information, it is not required for all projects depending on the priority and complexity of the project.
- Another definition is that it is an attempt to determine how much risk the project has , and where, so that you can spend your limited time and effort in the areas of greatest risk, to decrease the risk on the project.
- In order to define the probability and impact numerically of each risk , here are some methods which will help you quantitatively determine probability and impacts :
- Guess at a percentage of probability or a cost or time impact using subjective judgment.
- Calculate the actual cost and or time impact.
- Using historical records
- Use a Delphi technique
- Conduct interviews and expert interviews.
- Critical Success factors of Perform Quantitative risk analysis :
- Prior Risk Identification and Qualitative Risk analysis, To make sure Quantitative analysis will target the most significant risks, there should be an accurate list of prioritized risks from previous processes.
- Appropriate Project Model, As those models will be the basis of performing quantitative analysis , they should be accurate and they include Project schedule , Project Budget and decision tree.
- High quality Risk Data.
- Unbiased Data, You as a project manager should recognize when biases occur , you should be able to find and eliminate two sources of bias , motivational and cognitive biases.
- Overall project risks derived from individual risks, as it derives overall project risk from individual risks.
- Interrelationships between risks in Quantitative risk analysis.
- Iterative nature of the process where frequency of occurring is defined in plan risk management process.
- Major tools and techniques used in this process includes but limited to :
- Expected Monetary value of risks, used to determine what the overall probable circumstances will be as a result of events , it helps determine which risks need the most attention and should be moved into plan risk responses process. EMV = P * I , Opportunities should be subtracted from the threats. A Risk exposure is the expected monetary value of the project overall and it should be within the thresholds set by management , It is a common practice to use the expected monetary value of the project to forecast potential project costs because it is considered the only unbiased predictor and the best single value estimate for forecasting
- Monte Carlo Simulation, used when there are continuous probability distribution iterations performed to calculate the possible impact on project objectives, it’s using a software which use a random sampling process to pick up one time estimate for each activity and determine the project length and critical path, the main purpose Is to calculate the probability of competing the project on any specific day and amount of cost.
- Decision Tree, Models of real situations and are used to see the potential impacts of decisions by taking into account the associated risks , probabilities and impacts, it takes into account future events in trying to make a decision today and it involves mutual exclusivity .
- Failure Mode effect analysis ( FMEA ) .
- Sensitivity analysis, Used to analyze and compare potential impacts of identified risks, results in a tornado diagram while risks are represented in horizontal bars, the longest and uppermost bar represents the greatest risk.
- Data Gathering Tools , it includes assessment of historical data and workshops , interviews or questionnaire to gather quantified information
- Major output is risk register Updates :
- Prioritized List of Quantified Risks
- Amount of contingency time and cost reserves needed.
- Possible realistic and achievable completion dates and project costs.
- Quantified probability of meeting project objectives.