PMP lesson · Risk · Risk management · lesson 2 of 3 · about 8 minutes
Risk analysis: probability, impact and EMV
All approaches (predictive, agile, hybrid)Free preview
Goal: After this lesson you can rank risks with a probability and impact matrix, calculate expected monetary value, and use EMV to size contingency reserve.
1The situation
Twenty risks, limited time
The robot cell team identified 20 risks. You cannot spend equal time on all of them.
The sponsor also asks: “How much money should we keep aside for these risks?”
You need two things: a quick way to see which risks matter most, and a way to put a money value on uncertainty. That is qualitative and quantitative risk analysis.
2Two kinds of analysis
Analysis happens in two steps. First rank everything quickly, then calculate the important ones in detail.
Qualitative
Rank
Probability × impact, using scales such as low/medium/high. For all risks.
“R1 is high priority, R7 goes on the watch list.”
Quantitative
Calculate
Money or time values: EMV, Monte Carlo, decision trees. For the top risks.
“We need about $22,000 of contingency.”
Order on the exam: identify → qualitative → quantitative → plan responses. Quantitative analysis is not always needed; qualitative always is.
3See it in one picture: the probability and impact matrix
Probability ↓ / Impact →
Very low
Low
Medium
High
Very high
Very high
High
R1 vision
Medium
R2 guarding
Low
R3 air
Very low
Red = high priority (respond actively) · Yellow = medium · Green = low (watch list). Exception: a low-probability risk with a catastrophic impact, such as a fatal injury, still needs a response.
The three robot cell risks plotted on a 5 × 5 matrix.
4How it looks on the exam
Exam-style question 1. The team has identified 35 risks for a new production line, and the sponsor wants to know which ones deserve the most attention before the next steering meeting in three days. What should the project manager do?
A. Perform a Monte Carlo simulation of all 35 risks
B. Perform qualitative risk analysis to prioritise the risks by probability and impact
C. Develop detailed responses for all 35 risks
D. Transfer all high-impact risks to the suppliers
Show the answer and the decode
Answer: B.
In simple English
Many risks, little time, and the sponsor wants to know which matter most.
What is the question really asking?
The right next step.
Key words / trigger
“which ones deserve the most attention”
PMP logic
Prioritising risks is qualitative analysis: quick, applied to all risks, and done before quantitative analysis or response planning.
Why the wrong answer looks attractive
Monte Carlo sounds more advanced and impressive, but it is slower and used after prioritisation.
5Remember this
Your memory card
Qualitative = rank all risks (probability × impact) · Quantitative = numbers for the top risks
EMV = probability × impact; threats add, opportunities subtract
Net EMV of the risks ≈ contingency reserve
Monte Carlo = probability of dates and costs; catastrophic risks need responses even at low probability
The full lesson in the PMCLEAR app also has:
the rest of the lesson (Expected monetary value (EMV), Other quantitative tools (know what they do))