---
title: "Qualitative and quantitative risk analysis methods"
subject: "Project Engineering"
chapter: 5
key: "semester_7/project_engineering:qualitative-quantitative-risk-analysis-methods"
source: https://www.bctengineer.com/q/semester_7/project_engineering/qualitative-quantitative-risk-analysis-methods
site: BCT Engineering
---

# Qualitative and quantitative risk analysis methods

Project Engineering · Chapter 5: Project Risk Analysis and Management

- Asked in: 2079 Bhadra, 6 marks
- Video: [Qualitative vs Quantitative Risk analysis | Qualitative vs Quantitative | Risk Management](https://www.youtube.com/watch?v=vmFQa5ZQTS4) — Project Management World®
- Answer checked by Claude Opus 5.5 (high effort) on 2026-10-14
- Page: https://www.bctengineer.com/q/semester_7/project_engineering/qualitative-quantitative-risk-analysis-methods
- Whole chapter: https://www.bctengineer.com/md/semester_7/project_engineering/chapter-5

## Question

Explain the different methods of qualitative and quantitative analysis of risk.

## Short answer

Qualitative methods: probability-impact assessment, probability-impact matrix, risk categorization, urgency assessment, expert judgement. Quantitative methods: expected monetary value (EMV), decision tree analysis, sensitivity analysis (tornado diagram), Monte Carlo simulation, and PERT three-point estimate.

## Answer

#### Qualitative risk analysis methods

Qualitative analysis ranks risks by probability and impact using ordinal scales (low, medium, high).

1. **Probability and impact assessment:** each risk is given a rating for both.
2. **Probability-impact matrix:** combines the two ratings to give the priority.

```text
 Impact ->   Low      Medium     High
 Prob.
 High       Medium     High      High
 Medium      Low      Medium     High
 Low         Low       Low      Medium
```

3. **Risk categorisation:** risks are grouped by source (technical, financial, etc.) to find the problem areas.
4. **Risk urgency assessment:** risks that need an early response are dealt with first.
5. **Expert judgement and interviews.**

#### Quantitative risk analysis methods

Quantitative analysis puts numbers on the effect of the risks.

1. **Expected monetary value (EMV):** EMV = P x I. Example: P = 20% and loss = Rs 10 lakh give EMV = Rs 2 lakh.
2. **Decision tree analysis:** branches show decisions and chance outcomes; the branch with the best expected value is chosen.
3. **Sensitivity analysis:** one variable is changed at a time; a tornado diagram shows the most sensitive one.
4. **Simulation (Monte Carlo):** many random runs of the cost or schedule model give a distribution and the probability of meeting the target.
5. **PERT three-point estimate:** $t_e = (a + 4m + b)/6$ and variance $((b-a)/6)^2$.
6. **Interviewing and probability distributions** obtained from experts.

Qualitative analysis is quick and used for all risks; quantitative analysis is slower and used for the high-priority risks.

## Check yourself

The answer's key points as multiple-choice questions, with the correct option and why.

1. A risk with low probability and high impact is rated what in the matrix?
   A. Low
   B. Medium
   C. High
   D. Not rated
   Answer: B. Low probability with high impact gives Medium priority in the matrix. (Key point: Probability-impact matrix output)

2. A risk has probability 20% and loss Rs 10 lakh. What is its EMV?
   A. Rs 2 lakh
   B. Rs 8 lakh
   C. Rs 10.2 lakh
   D. Rs 50 lakh
   Answer: A. EMV = 0.2 x 10 lakh = Rs 2 lakh. (Key point: EMV calculation)

3. What does Monte Carlo simulation give?
   A. A distribution and probability of meeting a cost or time target from many random runs
   B. A single fixed cost
   C. The best contractor
   D. A qualitative rank
   Answer: A. Repeated random runs of the cost or schedule model give a distribution and the chance of meeting the target. (Key point: Monte Carlo)

4. What is the PERT three-point estimate formula?
   A. te = (a + m + b)/3
   B. te = (a + 4m + b)/6
   C. te = (a + b)/2
   D. te = (4a + m + b)/6
   Answer: B. PERT expected time is (a + 4m + b)/6, with variance ((b-a)/6)^2. (Key point: PERT three-point)

## Related in Project Engineering

- [Risk management; qualitative, quantitative; steps](https://www.bctengineer.com/question.md?key=semester_7%2Fproject_engineering%3Arisk-management-qual-quant-steps) — Project Engineering, chapter 5
- [Manage risk; qualitative and quantitative system](https://www.bctengineer.com/question.md?key=semester_7%2Fproject_engineering%3Arisk-manage-qualitative-quantitative) — Project Engineering, chapter 5
- [Why risk analysis is important in planning](https://www.bctengineer.com/question.md?key=semester_7%2Fproject_engineering%3Arisk-importance-analysis-planning) — Project Engineering, chapter 5
- [Risk analysis with hydropower example](https://www.bctengineer.com/question.md?key=semester_7%2Fproject_engineering%3Arisk-analysis-hydropower-example) — Project Engineering, chapter 5
- [Risk identification and analysis, rural road](https://www.bctengineer.com/question.md?key=semester_7%2Fproject_engineering%3Arisk-identify-analyse-rural-road) — Project Engineering, chapter 5

## Related in other subjects

- [Qualitative versus quantitative risk analysis](https://www.bctengineer.com/question.md?key=semester_7%2Fict_project_management%3Aqualitative-vs-quantitative-risk) — ICT Project Management, chapter 12