Risk Analysis

Risk Analysis Definition
Risk analysis is the procedure of analyzing and recognition of any kind of risk that
could affect adversely in the primary business objective or any critical projects that are about
to take place in an organization in regards to avoid or to take necessary initiatives to reduce
such risks in the organization.
Explanation
Risk analysis is about recognizing the negative or adverse effects that might happen in an
organization before taking up any new important project or changing any essential objective in
an organization that can impact the entity in any negative way. The main aim is to estimate the
extent of risk that may occur in the organization, the methods that can help to manage or reduce
the risk, and the approaches that can help in managing such risks. Specific strategies can help
analyze the risk in the Projects about to take place in the organization like the Delphi technique,
Swift analysis, Decision tree analysis, Bowtie analysis, etc. in the later stage.
Process of Risk Analysis
Analyzing risk in a project can have both a positive and negative effect. Such effects can be in
both worldly and non-materialistic impacts on the organization. A risk is an uncertain event
that can have both positive and negative effects.
Any organization shall follow the process for risk analysis which is discussed as below –
1. Identification of Risk
The First step comes as identifying the risk. Team members shall gather all the inputs
that shall be used in the projects and recognize the outcome of the projects and the
number of ways such is risk involved in the process, etc.
2. Analysing the Risk
After identifying risk, it’s likely to understand and assess the extent of risk and nature
of risk that most likely to happen and to what extent it may occur to the organization
shall be analyzed.
3. Evaluating the Risk
Analyzing risk helps you to estimate the capacity of risk that may happen. Hence in
evaluating the risk, the team shall rank the calculated risk to decide whether to accept
such risk or not.
4. Treat the Risk

In this step, the team shall decide whether to continue the project or not; if so, the project
is accepted, then they shall try to treat or resolve the issue by modifying any changes
required in the project.
5. Review the Risk
As the risk is uncertain at any point in time, reviewing risk is essential to evaluate risk
in the project from time to time to avoid any future disturbance.
Methods of Risk Analysis
Methods of Risk analysis include both Qualitative and Quantitative application techniques.
Most projects shall apply Quantitative analysis in measuring risk, which is overlooked in terms
of formal qualitative risks. Here is some of the useful qualitative risk analysis considered to be
involved in project ma
Importance
Risk analysis is one of the essential procedures which is not done diligently or not given enough
significance will lead to many problems, which may, in turn, could cause the failure of the
project. A well-analyzed project will have chances of going more smoothly and have a higher
chance of success and will do more to reduce risk than any risk plan, no matter how good it
may be.
Benefits
• Risk analysis helps you to make very calculated and accurate decisions while
performing a project as, without proper research, management of the project would not
be considered to give positive results.
• It helps in avoiding the potential losses that could occur in the future.
Limitations
• It is measured based on probability, so it cannot give the exact measurement of the risk
exposure.
• Risk analysis is based on specific data, and if there is any manipulation in the data or
the data is wrong, it will not give the correct results.
• It requires the time and expertise of the person conducting the analysis. In case the
person is not aware of all the techniques and methods necessary, then the desired
purpose cannot be solved. Also, there is no standard method for its calculation, so it
depends on the personal approach.
Quantitative vs. Qualitative Risk Analysis
Quantitative and qualitative analysis are the two approaches to risk analysis. In the case of the
Quantitative, the effect of the potential project risk that can be there on the target of the project
is evaluated numerically. So the primary purpose of the Quantitative analysis is to quantify the
risk exposure and determine the size of the cost and the schedule contingencies.
Whereas, in the case of the qualitative risk analysis, the probability and impact of the potential
project risk that can be there on the target of the project is evaluated against a pre-defined scale.
It is a subjective approach, and the primary purpose of qualitative risk analysis is increasing
the awareness of the severe risk and creating risk responses to deal and reduce the effect of
these risks on the overall project.

Risk Analysis

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Risk Analysis

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Risk Analysis Definition

Process of Risk Analysis

2. Analysing the Risk

3. Evaluating the Risk

4. Treat the Risk

5. Review the Risk

Methods of Risk Analysis

Quantitative vs. Qualitative Risk Analysis

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