Conceptual Framework of Quantitative and Qualitative Risk Integration - Essay Example

QUALITATIVE AND QUANTITATIVE RISK ANALYSIS Author’s name Institutional affiliations Instructor Course Department City/state Date QUALITATIVE AND QUANTITATIVE RISK ANALYSIS Introduction Most organizations in the aerospace, construction, pharmaceuticals among others are believed to concentrate their capital and resources on the organization projects rather than on the operation itself. In other words, a project can be considered as an endeavor that is conducted to establish a unique, service, product or result (Harrison et al 2013 761). Additionally, one of the most crucial elements of project management revolves around how effective their risks are managed .Moreover, Risk integration has been one of the most talked about processes in the project management over the past decade (Kalaugher et al 2013 176). Furthermore, ,different project management practitioners and researchers differ when it comes to the definition of integration of quantitative and qualitative risk processes but one thing that is common between them is the fact that this process is very challenging, difficult and complicated, but , it is nevertheless not impossible to deal with. Risk integration basically means the aspect of interlinking subsets, software’s, hardware to result in a unified risk management system that will be able to deal with any form of risks s and in the process, support the needs and the demands of the organization result (Harrison et al 2013 780). However, to researchers, integration of quantitative and qualitative risks is basically considered as a terminology that has been modified to stand for or rather represent a number of things (Finlayson and Downe, 2013 100). Therefore, in order to comprehend the integration process of quantitative and qualitative risks while at the same time understanding the functions and the important ace of the integration process, it is important to discuss the software’s that help in making the integration process in organizations very easy such as the risk integrator and the Primavera Risk Analysis software. Conceptual framework of Quantitative and Qualitative risk Integration Analysis of organizations Project portfolio can be conducted qualitatively by ensuring that the risk probability is defined and its impacts are as well defined at different levels (Finlayson and Downe, 2013 100). However, when it comes to scheduled or time-related risks, computation if the extent of risks by employing the qualitative technique can be at times be very challenging. In other words, one particular uncertainty can be linked to a number of activities and projects hence making it more difficult to determine the nature of extent of the risk using qualitative analysis. In this case, it is believed that the cumulative implication of such risks is very challenging without the employment of quantitative risk integration analysis (Goering and Streiner 2013 225). Therefore, it is important to note that, the process of managing the project portfolio as well as the risk associated with them is only effective if an organization employs both quantitative and qualitative risk analysis techniques (Finlayson and Downe, 2013 100). Integrated qualitative analysis revolves around the process of considering the consequences and the causes of project risks coupled with the likelihood for them to occur. In other words, they help in the assessment of the risks by taking into consideration their probability of occurrence alongside their impacts (Low et al 2013 225). Quantitative risk analysis involves the identification of the data that was previously involved in the contemporary risks as well as the measures employed in solving the risk. . In this case, the risk management process revolves around risk identification, risk management planning, quantitative and qualitative risk integration or analysis, risk control and monitoring and risk response planning (Low, 2013 1469). It is for this reason why Integration of qualitative and quantitative risk analysis process forms one of the most crucial components of enterprise risk management. Organizations are universally acknowledged to analyze and determine the extent of risks associated with programs, project portfolios and projects (Finlayson and Downe, 2013 100). Additionally, such risks can occur as a result of the project schedules and in the process affect project completion dates, project durations, resources, success rates and project costs (Aven 2015 35). The integration process of risks commences by the identification of risks where the risks are written on the corporate risks register after which they are included on the risk matrix. During this phase, the risks are categorized qualitatively. Moreover, after this stage, the risks are then analyzed quantitatively to determine the project schedules using the event chain methodology (ECM). Apparently, ECM is defined as a stochastic technique of modeling used for schedule risk analysis. In this case, all forms of project risks that encompass both the non-scheduled and scheduled risks are assigned to each and every activity within the project (Ayyub 2014 74). Furthermore, the Event Chain methodology of risk integration gives room for individuals to model any relationship that exists between the projects risks by ensuring that they define any potential risks that play a significant role in causing or triggering any other risks. In this case, the identified risks coupled with their relationships are then drawn and presented in the event grant charts by the help of the event chain diagrams. After the assignment of risks to the project portfolios, schedules and project itself, the simulation of the project is performed in the process known as the Monte Carlo simulation according to the standard scheduling algorithm (Donskey et al 2014). At this stage, all forms of statistical computations and distributions of costs, finish time, duration, project cost, other parameters and resource allocation are important in determining whether the project is more than capable to be completed within budget and within the stipulated schedule. Besides, the risks that are registered in the risks register are then categorized and ranked according to their computed implications and their probabilities (Mamoghli Goepp and Botta-Genoulaz 2015 1). In simple terms, the risk integration process is basically employed in ensuring that the risks are identified, mitigated and reduced most especially by the project schedulers. Risk integrator One of the most prevalent challenges in project management in many organizations is the establishment of a robust and stable calculation environment that can as well manage the integration of multiple numbers of exposures, methodologies and parameters that are used across the organization (Mamoghli Goepp and Botta-Genoulaz 2015 1). Additionally, even the most complex and extensive organization with ample experience with integrated management of risks always incur challenges when it comes to achieving stable platform. That is why risk integrator software is of utmost importance. In other words, a risk integrator is system software that helps organizations in building a stable platform through parameter extraction, scenario generation, reporting, risk aggregation, exposures variation data extraction and data loading. The figure 1 below represents how a risk integrator basically works (Finlayson and Downe, 2013 100). Apparently, the risk integrator helps in producing consistent results that are very auditable and reliable. Thus, a risk integrator has a controller that is well-established to oversee the whole integration process of risk in the sense that it ensures that each and every step is strictly followed in the right manner and order. Besides, it ensures that an organization is able to manage the interlinking and coordination of parameters, files and risk scenario types by aggregating the outputs of the risks in a more competent and consistent manner. Furthermore, without the employment of the risk integrator or a risk controller, it is accepted that it is not possible to realize robust results that are able to be in line and meet the interests of the organization’s stakeholders (Finlayson and Downe, 2013 100). In this case, the Risk integrator is able to offer the much-needed control layer that ensures that an organization is able to possess a stable platform in which to assess its risks. Figure: Hierarchy of the risk integrators: (Source: web images) The risk integrator plays a very significant function in offering a stable platform for a company’s risk management and integration process calculations or Solvency 11 computations while simultaneously taking full advantage of each and every software or tools that exist (Ayyub 2014 74). With this software, it is believed that an individual can be able to organize the management risk framework in the sense that it arranges fully customizable tree structures that portray the whole risk integration with each tree node a representation of a step in the computation phases (Harrison et al 2013 761). Additionally, each subnode in the computation tree is believed to have the potential of to run separately, in the process, each of the organization users are therefore in the position to access the most recent execution of the files or the software and besides, the nodes in the tree are coded with color which makes it possible to offer an immediate visual status view of the software tree (Ayyub 2014 74). The aggregation tree nodes in a risk integrator are as well referred to as Risk Blocks which are a representation of the necessary steps that the organization defines by identifying the input files or the algorithm tools required to use as well as the output files required for the results and the reporting of the risks. Primavera Risk Analysis This is a software that is acknowledged as a full and complete lifecycle risk analytics solutions that are able to integrate schedule risk management and costs Additionally, this software offers a comprehensive and extensive technique of establishing the confidence levels of the success of the projects coupled with easy and quick methods for establishing the risk response plans and contingency plans (Harrison et al 2013 761). In this case, the operator is able to have an objective view of the needed contingency to give a great account of schedule and cost uncertainty while at the same time analyzing the effectiveness and the cost of risk response plans combined with a risk adjusted schedule. It is accepted that the Primavera Risk Analysis assists organization projects to ensure that each and every mission critical projects are performed according to the stipulated budget and on time (Kalaugher et al 2013 176). Features of Primavera Risk Analysis It possesses comprehensive risk analysis reports and graphics Employment of Monte Carlo simulation to identify risk reports as far as probability and confidence levels is concerned (Aye et al 2016 33). It has tracking and management attributes that help in quantitative and qualitative risk integration analysis, responses, impacts and project risks (Harrison et al 2013 761). Benefits of Primavera Risk Analysis Primera Risk Analysis is important in identifying common scheduling hitches that can at times lead to misleading project scheduling or examination of the results of the risks. It is able to Integrate predeveloped registers of risks and in the process define and establish new risk registers. Offer a comprehensive avenue of reporting the confidence levels of the projects Offers a methodology for establishing risk response plans and contingency plans. It is able to address and tackle a full and complete risk analysis lifecycle through the employment of Monte Carlo according to schedule and cost analytics (Ayyub 2014 74) It is also in a better position to report any forms of confidence as far as the finished float, costs, and internal rate of return, completion dates and the net present value. Figure 2: Distribution graphs used to determine the levels of confidence for project schedules, plans and cost contingencies (Source: web images: https://www.google.com/search?q=Primavera+Risk+Analysis&biw=1024&bih) Figure 3: Primavera Risk Analysis Source: web Images: https://www.google.com/search?q=Primavera+Risk+Analysis&biw=1024&bih) Significance of Qualitative and quantitative Risk integration process and its importance to organization projects The importance of conducting a qualitative risk assessment is that it helps an organization to acquire safety against potential organization risks and in the process increase the alertness of team members, personnel and the management who are basically believed to vulnerable to them (Ayyub 2014 74). In other words, this risk integration technique is important in identifying project impediments issues that have the capability of becoming hazardous risks (Kalaugher et al 2013 176). By employing a qualitative risk analysis, it is possible for an organization to identify rectifying techniques that can be employed in mitigating risks that revolve around the employment of the organization resources. Although integrated quantitative risk analysis cannot be able to function without the employment of the necessary and available data as far as the precious contemporary risks and methodology employed in mitigating them, it is accepted that it is important in ensuring that the existing discrepancies in the organization’s projects are weeded out for the project to function effectively (Harrison et al 2013 761). Conclusion In the modern world, it is universally acknowledged that there is a diverse and rich choice of risk management software that are available for each and every domai9n of the business. Additionally, the processing ability and capability of this software’s are accepted to be advanced and huge. However, one funny aspect is the fact that the high number of hardware’s and software available can be classified as islands of systems of processing even if they are applied across business boundaries or within an organization. Therefore, it is imperative for groups to incorporate integrated qualitative and quantitative risk analysis in order to ensure that they deal with all issues that revolve around project timing, scheduling, cost and the employment of resources. Reference list Aven, 2015. Risk analysis. John Wiley & Sons. Aye, Z.C., Jaboyedoff, M., Derron, M.H., van Westen, C.J., Hussin, H.Y., Ciurean, R.L., Frigerio, S. and Pasuto, A., 2016. An interactive web-GIS tool for risk analysis: a case study in the Fella River basin, Italy. Natural Hazards & Earth System Sciences, 16(1). Ayyub, B.M., 2014. Risk analysis in engineering and economics. CRC Press. Donskey, C.J., Yowler, M., Falck-Ytter, Y., Kundrapu, S., Salata, R.A. and Rutala, W.A., 2014. 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