Qualitative Risk Analysis

The risk level is referred to as “qualitative” since it is a quick approximation and does not reflect the rigor of a detailed, numerical analysis. The risk level should be high, medium, or low, depending on the severity of impact and the probability of the event occurring.

There are many techniques for performing qualitative risk analysis. Three examples are shown in this section, but there are other techniques as well.

High, Medium, Low Table

Use the following table as a starting point. It helps identify high, medium and low level risks by looking at the probability of the occurrence and the overall impact to your project. For instance, a highly likely / high impact event is obviously a high risk. Likewise an event that has a low impact to your project, and has a low likelihood of occurrence anyway, is obviously a low risk. The other combinations fall somewhere within these two extremes. However, each event must be evaluated individually. If you have an event that is not likely to occur, but the impact, if it occurred, would be devastating (i.e. someone could get killed), you would still want to consider it a high risk and put together a Risk Management Plan accordingly.

Severity of Risk Impact / Probability of Risk Occurring	Overall Risk Level
High negative impact to project / Highly likely to occur	High
High negative impact to project / Medium likely to occur	High
High negative impact to project / Not likely to occur	Medium/Low
Medium negative impact to project / Highly likely to occur	Medium
Medium negative impact to project / Medium likely to occur	Medium/Low
Medium negative impact to project / Not likely to occur	Low
Low negative impact to project / Highly likely to occur	Low
Low negative impact to project / Medium likely to occur	Low
Low negative impact to project / Not likely to occur	Low

High, Medium, Low Color Chart

You can also represent these nine simple risk combinations in a table as follows:

Probability -> Impact	Low	Medium	High
Low	Ignore	Ignore	Caution
Medium	Ignore	Caution	Response
High	Caution	Response	Response

The green boxes represent a combination of probability and impact that you may safely be able to ignore. The red boxes represent combinations that need to be managed. The yellow boxes represent combinations that should be evaluated further individually.

Risk Probability Table

You can allow for more precision by increasing the number of options available for the probability of the risk. For instance, you could create a five-part scale for the probability of risk as follows.

Probability	Low Impact	Medium Impact	High Impact
Hardly likely (<>	Low Risk	Low Risk	Low Risk
Not likely (<>	Low Risk	Low Risk	Medium Risk
Might or might not happen (35% - 65%)	Low Risk	Medium Risk	Medium / High Risk
Likely (>65%)	Low Risk	Medium / High Risk	High Risk
Highly likely (>90%)	Low Risk	Medium / High Risk	High Risk

Instead of a simple low, medium, high impact, you can be more elaborate. For instance, you could again develop a five-part scale as follows (this scale applies to each risk):

1. low (or no) impact in terms of cost and schedule
2. a potential 2%-4% impact in terms of cost or schedule
3. a potential 5%-7% impact to budget or schedule
4. a potential 8%-10% impact to budget or schedule
5. high, potential of over 10% impact to budget or schedule

After you create a scale like the one above, you would still need to determine how to analyze the information. For instance, you may decide that a scale level 1 or 2 can be ignored, while a scale level of 4 or 5 should be managed. The level 3 would represent risks that need to be evaluated individually.