Risk Doctor Briefing
SERIES ARTICLE
Dr David Hillson, PMI Fellow, HonFAPM, FIRM
The Risk Doctor Partnership
United Kingdom
Many people view quantitative risk analysis with a mixture of fear and awe. It’s clearly a very powerful technique in the risk professional’s toolkit, but it seems to be hard to use. As we decide whether it’s appropriate for us to include quantitative risk analysis in our risk approach, we should consider the strengths and weaknesses of this technique, so that we can make a balanced judgement.
Using quantitative risk analysis has a number of benefits, including:
- Providing a means of analysing the combined effect of risks together on objectives, rather than treating each risk separately and individually.
- Describing risks quantitatively, using numbers or ranges for probability and impacts, instead of ambiguous descriptive terms such as High or Low.
- Offering consistency in analysis, since the operation and output of a simulation model is independent of the person running the analysis and is not subject to their subjective preconceptions and bias.
- Allowing exploration of a range of options for addressing risk, through the ability to flex the model to analyse different scenarios and alternatives to the base case.
- Reflecting a degree of complexity that exceeds what can be understood by a single person or held in their memory, allowing development of a sophisticated model of reality which can accurately predict outcomes.
- Presenting targets realistically, as a range of possible outcomes rather than as a single point.
There are also however shortcomings in using quantitative risk analysis, including:
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How to cite this paper: Hillson, D. (2020). Quantitative Risk Analysis: Strengths and Weaknesses, Risk Doctor Briefing; PM World Journal, Volume IX, Issue XII, December. Available online at https://pmworldlibrary.net/wp-content/uploads/2020/11/pmwj100-Dec2020-Hillson-quantitative-risk-analysis.pdf
About the Author
Dr David Hillson HonFAPM PMI-Fellow CFIRM CMgr FCMI
The Risk Doctor
Known globally as The Risk Doctor, David Hillson leads The Risk Doctor Partnership (www.risk-doctor.com), a global consultancy offering specialist risk services across the world.
David has a reputation as an excellent speaker and presenter on risk. His talks blend thought-leadership with practical application, presented in an accessible style that combines clarity with humour, guided by the Risk Doctor motto: “Understand profoundly so you can explain simply”.
He also writes widely on risk, with eleven major books, and over 100 professional papers. He publishes a regular Risk Doctor Briefing blog in seven languages to 10,000 followers, and has over 11,000 subscribers to the RiskDoctorVideo YouTube channel (www.youtube.com/RiskDoctorVideo).
David has advised leaders and organisations in over 60 countries around the world on how to create value from risk based on a mature approach to risk management, and his wisdom and insights are in high demand. He has also received many awards for his ground-breaking work in risk management over several decades.
To see other works previously published in the PM World Journal by Dr David Hillson, visit his author showcase at http://pmworldlibrary.net/authors/dr-david-hillson/