Question

Within the concept of risk management, which type of approach do you prefer: quantitative or qualitative to conduct risk assessments within an organization? What are the disadvantages and advantages of both approaches?

Answer 1

Solution:

In qualitative risk assessment, the probability of a risk occurring is and the impact on the selected organization is the main focus and the parties which are interested (e.g., financial, reputational, etc.). On the scale of low to medium to high or 1 to 2 to 3 or a to b to c which will act as the defining value of the risk involved the perception is being represented.

On the other hand, quantitative risk assessment's objective is to focus on factual and metric data, which is based on highly mathematical and computational bases, risk values are calculated here in the momentary terms, the probabilities and impact values are also calculated here. which in return outside of the context of the assessment makes the result useful. (loss of money is understandable for any business unit).

Advantages of Qualitative risk assessment:

1. Qualitative risk assessment focusses mainly on the quality of the project while building and the representation is easy.
2. Qualitative is a simple assessment method.
3. Prioritization is easy here.
4. Frequency does not need to be determined.
5. The impact on cost and schedule need not to be quantified.

Disadvantages of Qualitative risk assessment:

1. The methods for calculation are complex here.
2. Implementation is tough without any automatic tool.
3. the process handles a long time here.
4. The process is very complex.

Advantages of Quantitative risk assessment:

1. It is easier to understand and observe the level of the risk involved.
2. The calculation and methods are easy to understand.
3. The frequency of the occurrences of the threats is not necessary to be quantified.
4. The quantitative value of the frequency and impact are not necessary.

Disadvantages of Quantitative risk assessment:

1. The calculations for the risk and impact are subjective.
2. A cost-benefit analysis is not implemented here.

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