Risk analysis is the process of identifying, assessing, and prioritizing risks that could affect a project, business, or organization. It is an essential part of risk management that helps to minimize the impact of potential risks on the project in terms of schedule, quality, and costs . The risk analysis process involves several steps, including identifying and quantifying uncertainties, estimating their impact on outcomes that we care about, building a risk analysis model that expresses these elements in quantitative form, exploring the model through simulation and sensitivity analysis, and making risk management decisions that can help us avoid, mitigate, or otherwise deal with risk .
There are many project risks that can affect your project and as a project manager, you are responsible for the risk analysis process. Risk analysis allows project managers to classify project risks and determine which of them should be tracked closely . Risk analysis consists of using tools and techniques to determine the likelihood and impact of project risks that have been previously identified. Therefore, risk analysis helps project managers decipher the uncertainty of potential risks and how they would impact the project in terms of schedule, quality, and costs if they were to show up .
There are two types of risk analysis: qualitative and quantitative. Qualitative risk analysis refers to the risk analysis tools and techniques that rely on expert subject matter opinions, subjective and non-statistical means to assess the likelihood and impact of project risks . Quantitative risk analysis involves using numerical data to assess the likelihood and impact of project risks. This type of analysis is more objective than qualitative risk analysis but requires more data .