Quantitative Risk Analysis Associated with an International IT Project

After qualitative methods for the project “Managing Risks during COVID Pandemic Associated with an International IT Project” are performed, quantitative methods are optional to be performed to support the project. During the risk management planning phase, all potential risks are identified and detailed in the risk register. Then, qualitative methods analyze risks before moving on to either quantitative methods or direct risk response planning. Qualitative risk analysis evaluates individual risks with the probability and impact of individual events’ occurrence, whereas quantitative risk analysis is solely used to provide numerical estimates of the overall impact of those identified risks. The main difference between qualitative and quantitative risk analysis is that the mandatory one is for individual risks, and the optional one is for the overall risk. The optional methods are selected to identify schedule and cost risks as the method provides numerical estimates. As mentioned earlier, qualitative risk analysis occurs before quantitative risk analysis. Thus, risks or events used for qualitative risk analysis are reassigned to the optional analysis. The impact values in the quantitative risk register must be numbers such as percentage and cost or time. As for the project, quantitative risk analysis will be performed to assess the overall project risk after qualitative risk analysis is conducted. Even though it is optional, the project is large enough to evaluate the overall project risk for decision-making. Furthermore, the project deals with the global market and requires much effort to identify all potential risks since the global pandemic has occurred in various places.

As discussed earlier, quantitative risk analysis is optional for a project. However, it should not be neglected without understanding what a project is about and its requirements. If the project is vast and deals with many resources and risks, the overall project risk is critical to be identified. Additionally, quantitative methods assist project managers in making decisions efficiently as the methods provide objective results other than subjective information. The numbers from the quantitative analysis are still numerical estimates that project managers can implement for their decision-making process. Last, quantitative risk analysis is used to better estimate project managers’ decision-making. For example, a project manager uses a Work Breakdown Structure to estimate the task, which results in a certain amount of overall cost and schedule. However, the project manager did not assess the risks, whether it is helpful or harmful, on the project schedule and cost. Eventually, the project time is delayed, and the budget is increased than estimated.

Managing Risks during COVID Pandemic Associated with an International IT Project significantly requires quantitative risk analysis to avoid unexpected delays and budget increases. The scale of the project is large and needs the overall assessment of risks. Individual risks are substantial to evaluate, but the overall risk is essential to estimate the entire project schedule and cost and avoid significant delays and high costs. The project is for international IT that covers multinational companies and customers. It has many individual risks requiring quantitative risk analysis to assess the overall risk.

As the reason that quantitative risk analysis is needed is described earlier, it is crucial to know when this analysis needs to be performed. The first step is identifying risks, which should occur when qualitative risk analysis is performed. Then, a project manager decides whether quantitative risk analysis is necessary for the project. A few things must be considered before quantitative risk analysis is performed. First, it is vital to know that a contingency plan for the budget and schedule is required for the project. If the project is small, this method might not be as effective as the large project. It is also essential to identify significant and complex projects to have many decision-making processes. Last, it is critical to perform quantitative risk analysis when higher departments or stakeholders who oversee the project want to know more detail about the project with numerical estimates.

As discussed above, the project of Managing Risks during COVID Pandemic Associated with an International IT Project will be conducting two different risk analyses in a sequence. First, all potential risks related to an international IT project during the global pandemic need to be identified and documented in the risk register, while continuously updating the risk management plan. Second, the probability and impact of those individual risks’ occurrences are displayed on the table with the scales, which can be qualitative, textual, color coded, or some combination. Next, the overall risk of the project needs to be assessed with numerical values, conducting quantitative risk analysis. The project is large enough to consider the overall project risk that may significantly impact decision-making processes.

Some components are required to perform quantitative risk analysis for a project. These include risk management plan, scope baseline, schedule baseline, and cost baseline. The risk management plan is a tool to identify whether quantitative risk analysis is needed or not. The scope, budget, and schedule baselines explain individual risk events' effects and uncertain events' evaluations. Several documents are also required to process this method and evaluate risks quantitatively: cost estimates, cost forecasts, duration of estimates, milestone lists, risk registers, schedule forecasts, and others. These documents must be included before performing the quantitative risk analysis.

There are appropriate tools and techniques required to perform quantitative risk analysis. Expert judgment is required to conduct this analysis efficiently and adequately. Anyone who has expertise in a specific area needs to be involved in this judgment. For example, a person needs to be specialized in translating information on individual risks into the overall project risks with numerical values. The tool cannot be effective if the person is not familiar with this technique. Interpersonal and team skills are other essential tools for performing quantitative methods. During a meeting involving project team members and stakeholders, a project manager with exceptional interpersonal and teamwork can collect extensive information that might be useful for quantitative risk analysis. After data is collected from individual project risks, it is critical to simulate to identify the scale of the potential impact on project objectives. One of the typical simulations is a Monte Carlo analysis evaluating cost or schedule risk with cost or schedule estimates. Both cost and schedule risks can be integrated to perform a quantitative risk analysis.

Decision trees are essential tools for selecting and deciding out of several different courses of action when performing quantitative risk analysis or dealing with uncertainty. For instance, there is a software program that needs to be improved by either upgrading or replacing it with an innovative design. The decision trees display two selections with its expected monetary value (EMV), probability, and the net path value. Each selection contains two outcomes with strong and weak demands, which are uncertain. The net patch value is calculated by the demand minus the selection, which provides the EMV of the overall decision. The selection with a higher EMV represents the lowest risk that helps avoiding the worst potential outcome of a loss. For the international IT project, decision trees can be useful when experiencing uncertainty with high risks.

Multiple inputs are recommended to perform a quantitative risk assessment. For Managing Risks during COVID Pandemic Associated with an International IT Project, a risk management plan is necessary to identify if quantitative risk analysis is needed and will be helpful for this project. The baselines for scope, schedule, and cost are also critical information to collect since the overall project risk created by individual project risks is an objective to obtain. Since the project has many stakeholders from various places, its potential risks can be various and extensive. Thus, it is important to gather all data and evaluate the overall risk to be prepared in case of a contingency case.

After conducting a quantitative risk analysis, a project team may obtain some results, including an assessment of overall project risk, probabilistic analysis, a priority of individual risks, and recommendations for risk response. Two essential outcomes can be provided from the assessment: probabilities of project success based on identified project risks and variability remaining when the assessment is conducted. Key outputs from the probabilistic analysis are individual project risks that might impact significantly on a project. With this detailed analysis, individual project risks can be listed in prioritized order to prevent the most significant impact on the project. For example, the International IT project requires a prioritized list of individual project risks so that a project team can reduce the most significant effect of those risks on the project. As the project handles multinational companies, the impact of individual risks can be significant, so it is vital to identify and prioritize the list of risks.