Uncertainties and Risk Management - Essay Example

Failing to do so will lead to the entire failure of the project which no matter manager would want. So there are two ways to calculate risks involved namely qualitative and quantitative analysis. The importance of both has already been seen and it is concluded that qualitative analysis is far better than quantitative analysis; qualitative analysis should be carried out by any manager before starting a new project to make sure that the various risks involved in the project are taken into the equation and a good strategy is developed to deal with the same. It is also concluded that the higher the risk, the higher the efforts, which basically means that to deal with higher risks the management team has to put in more effort to face the same.

There are some people who believe that hiding the risk will take the risks out of the equation which is an extremely old concept, management has changed a lot these days and this concept has never worked in the favor of any manager and it will never work in the favor of any manager in the future too. So this should never be practiced because it will only lead to failure. All the above statements point that it is not fair to say that qualitative risk analysis is better to sell to a manager, the same is proved with an example “There is a classical example. One large oil company performed drilling of the well with a total cost of about $2M. The project schedule has been created based on analogs: drilling of similar wells in similar geological conditions.

In the middle of drilling the mud, required for this technological process, starts disappearing. Project engineers have tried different solutions. It delayed the project so significantly that the total cost of the well has almost doubled. Later on, the project manager has admitted that it would be cheaper to abandon the well and drill a new one somewhere else. Or perhaps don’t start drilling in the particular location in the first place. Unfortunately, the company did not have a well-established project risk management process at this time. What should be done is to properly analyze the project with risks and uncertainties at the stage of project planning, and then reassess risks during a course of the project.” (Ken Mckinley, 25 September 2008). This is a very good example to understand how qualitative analysis helps managers, in this case, had the company done qualitative analysis they would have has access to data that they didn’t have access to and they would have easily identified the problem as a potential problem and the managers would have surely worked out a solution for the same.

The analysis would have provided them with events that were uncertain and unpredictable but the managers did not bother to do so and hence faced the consequences. Had the manager's done qualitative risk analysis they would have surely saved millions of dollars and the example goes to show that it is better to do qualitative analysis rather than quantitative analysis. Read More