Perform Quantitative Risk Analysis
Perform Quantitative Risk Analysis is the process of numerically analyzing the combined effect of identified individual risks and other sources of uncertainty on overall project objectives.
Explanation
Quantitative risk analysis goes beyond the subjective assessments of qualitative analysis by using numerical techniques to evaluate the aggregate effect of risks on cost, schedule, and other objectives. It produces probabilistic estimates such as the likelihood of meeting a target date or budget and the amount of contingency reserve needed.
Key techniques include Monte Carlo simulation, sensitivity analysis (tornado diagrams), expected monetary value (EMV) analysis, and decision tree analysis. These methods require quantitative data—probability distributions, three-point estimates, and historical data—making the process more resource-intensive than qualitative analysis.
Quantitative analysis is not performed on every project. It is most valuable on large, complex projects where the stakes are high and sufficient data is available. The results update the risk report with overall project risk exposure, S-curve graphs, tornado diagrams, and probabilistic forecasts that inform reserve decisions and stakeholder communication.
Key Points
- •Uses numerical techniques to assess combined risk effects on objectives
- •Key tools: Monte Carlo simulation, sensitivity analysis, EMV, decision trees
- •Produces probabilistic forecasts and contingency reserve estimates
- •Performed only on high-priority risks or complex projects with sufficient data
Exam Tip
Quantitative analysis is optional and follows qualitative analysis. It is the only risk process that is explicitly not required on every project per the PMBOK.
Frequently Asked Questions
Related Topics
Monte Carlo Simulation
Monte Carlo simulation is a quantitative risk analysis technique that uses random sampling of probability distributions for cost and schedule estimates to model possible project outcomes and calculate the probability of achieving targets.
Sensitivity Analysis (Tornado Diagram)
Sensitivity analysis is a quantitative technique that determines which individual risks or uncertainties have the greatest potential impact on project outcomes. The tornado diagram is its primary visual output.
Expected Monetary Value (EMV)
Expected monetary value (EMV) is a quantitative risk analysis technique that calculates the average outcome of a risk event by multiplying the probability of occurrence by the monetary impact. EMV for threats is negative; for opportunities, it is positive.
Decision Tree Analysis
Decision tree analysis is a diagramming and quantitative technique used to evaluate multiple decision alternatives, each with associated costs, probabilities, and outcomes, to select the option with the best expected monetary value.
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