Not all projects need to conduct a quantitative risk analysis. That is usually reserved for the mega-projects. Remember, though, the PMP Certification Exam assumes you have a large project, so you need to be familiar with these techniques.
Perform Quantitative Risk Analysis. Numerically analyzing the effect of identified risks on overall project objectives.
As the name implies, the techniques in this process are quantitative: In other words, you have to do the math! If you’re math-phobic, review this part enough times to develop a comfort level with the concepts.
The purposes of performing quantitative analysis are to
Perform a deeper analysis on those risks that can potentially and substantially impact a project objective.
Determine the likelihood of meeting cost and schedule objectives and provide a range of outcomes.
Determine realistic schedule and budget targets given the project risks.
Provide a method to quantify some of the uncertainty in the project to make better decisions.
If you’re engaging in this process, you should do it both before and after you develop risk responses. You should expect to see the overall project risk drop significantly after applying risk responses.
Perform Quantitative Risk Analysis: Inputs
You need several components of the project management plan to conduct a quantitative risk analysis:
Schedule management plan
Cost management plan
Risk management plan
Of course, you also need your risk register with your prioritized risks and any organizational or external information you can use to better understand the nature of the high risks.
Perform Quantitative Risk Analysis: Outputs
What does all this work get you? Well, for starters, it gets you quantified information on those risks that pose the greatest risk to your project. EMV, decision trees, and PERT analysis can help with that. It helps you understand which risks will have the greatest impact to your project. You can use a sensitivity analysis to get that information.
A simulation will tell you the likelihood of meeting cost and schedule objectives. You can also use the simulation to note project performance trends. For example, if you run the simulation once per quarter and find that the probability of hitting your budget target is progressively going down, you’ll want to take some corrective action.