With excerpts from my Project Management Novel, I will illustrate the many processes of the PMBOK. Here is the twenty-first one: Perform Quantitative Risk Analysis. Use this map to see how this process fits into the scheme of processes.
“All right then,” said Gwilym. We have the tool we need to sort the risks we identified, what do we call it?”
“Quantify Risks?” suggested Bleddyn. “We end up with a number that indicates how bad the risks are.”
“We do,” agreed Gwilym, “but the number isn’t really the quantity. For instance, if we found a risk that Fred just mentioned that cost a week and two gold and the probability score we gave it was Five, we would score it a Twenty-five. But twenty-five what? Gold? Silver? Days? Twenty-five is not the quantity of the risk. The real risk to the project would be the impact on the cost and the schedule divided by 1,000 because that is the chance of that risk occurring. So the quantified risk would be 1/500 of a gold or one third of a copper piece and 10 minutes. But that’s assuming we know exactly the probability and the severity. More likely we’re just guessing the relative size of the risks.”
“So what we are really doing is performing Risk Qualification, not Quantification. We get a relative number we can use to sort risks into those we have to deal with and those we can allow to happen.”