Qualitative Risk Analysis and Quantitative Risk Analysis are methods used in project management to assess risk.
Much like a Monte Carlo Simulation, qualitative and quantitative forecasting models can be useful in real-life project management, and they are important to know if you are preparing to take the PMP Exam.
So, if you plan to get that Project Management Professional certification from PMI, get familiar with qualitative and quantitative analysis.
Aside from a a couple of letters, what differentiates these two processes?
Difference Between Qualitative and Quantitative Analysis
In the simplest terms, remember that:
Qualitative Risk Analysis is a planning process that seeks to place subjective values on identified risks and their likelihood of happening.
When you see “Qualitative Risk Analysis,” think “quality of risk value.”
Quantitative Risk Analysis is a planning process that seeks to assign objective numerical values to identified risks and their impact on the overall project.
When you see “Quantitative Risk Analysis,” think “quantity or numerical value of risk impact.”
That’s the simplified version of the two and is how I keep them separated, but let’s break them down further.
Qualitative Risk Analysis
Qualitative Risk Analysis is almost always used on a project.
Tt can be pretty informal and based largely on the opinions of the project manager and the project team, to essentially rate risks based on the likelihood they will happen and the impact they would have if they did.
This is where you employ a Probability and Impact Matrix — finding the cross section of probability (likelihood of occurrence) and impact (effect if the risk were realized) to assign values to individual and categorize them as, for example, low, medium or high.
Quantitative Risk Analysis
On the other hand, Quantitative Risk Analysis seeks to use mathematical models and simulations to numerically represent the effect a realized risk could have on the overall project.
So it’s generally a more formal approach to assessing risk.
This is where you employ a Monte Carlo Simulation, for example, to analyze the effect a risk could have on project schedule and cost.
Final Thoughts on Qualitative and Quantitative Analysis
You’ll need to have a good idea of the difference between Qualitative Risk Analysis and Quantitative Risk Analysis before taking the PMP Exam.
You’ll also likely encounter need for one or the other while managing real-life projects, somewhere along your project management journey.
In addition to forecasting models, qualitative and quantitative data analysis pops up in the PMBOK Guide as a Stakeholder Analysis tool, used to help a project manager gather information on stakeholders to use in project communications.