Quantitative Risk Management and Analysis in a Nutshell

Risks and uncertainties affect almost every project. In fact, every project manager along with a team of risk managers plans strategically in order to reduce risk associated with projects. This is why this new field of quantitative risk management is on the rise these days. This article shows in brief the importance of quantitative risk management and thorough risk analysis. Read on and reduce your project related risks substantially.

Do you think your projects involve many risks and uncertainties? Maybe you are right. But, the truth is almost all projects in the world have risks and uncertainties. Most research and development projects suffer from the effect of this type of risk. And their impact is very significant and no one can overlook it. The most unfortunate fact is that many managers are still aloof from the importance of quantitative risk management system and they knowingly or unknowingly, don’t bother to employ a solid system.

Let’s consider some examples-

There was a large oil company. They had a project to drill a well which would cost them about $2M. The project manager created project schedule which was based on analogs: the cost of drilling wells in the same location. In the middle of the project, the drilling mud which was required for technological process started to disappear. The project manager tried applying many solutions but in vain. And due to this reason, the cost of drilling was almost doubled and it delayed the project completion timeline. In the end, they reached a conclusion that they needed an established quantitative risk management system. This system, according to their observation could have averted the disastrous results significantly.

The Physiological Issue-

Many project managers all across the globe still doubt the effectiveness of such quantitative risk management system. Either they don’t have complete information about these risk management- analysis methods or they simply ignore them hurriedly, without considering its benefits.

What is the solution?

Most risks and uncertainties stem from a sheer lack of knowledge about incoming project activities and associated risks. However, the solution to this problem is easy and has two parts-
Part one: Gather all historical records, information and utilize it to make an accurate estimation and data-based analysis.

Part two: One needs to be careful in order to track all project performance reports. It includes information about risks and uncertainties. One must stay updated on estimation management reports. By absorbing and adapting to new and updated info about project performance when it becomes available, risks can be reduced strategically.

Most real-life projects have multiple risks and uncertainties. It, for sure, affects the project in various ways. This is where a solid and computerized quantitative analysis and management tool becomes a great help. And it is the only feasible way to manage, analyze and reduce risks and uncertainties substantially. It also helps project managers to manage future project risks.

The Bottom Line-
In order to reduce project risks and uncertainties, quantitative risk management is of great help. Most importantly, it lets companies complete a project on time, within the estimated budget and leads to the huge success of a project. Experts recommend that seeking professional help for having a sound plan for quantitative risk management is the right solution.