Quantitative analysis

Your response plans to risks must be justifiable; for example, paying €1,000 per month in insurance to avoid a low-probability event that may cost millions of euro may be justifiable, but it won’t be justifiable if the damage is only a couple of thousand euro.

Many methods leave it to you to judge the justification of responses in an intuitive or ad hoc way, and that’s fine in almost all projects. However, some sensitive projects require a more structured way of analyzing risks.

In that case, you can extract the required data and use the Monte Carlo analysis to combine them in various forms and give you the probabilistic outputs before and after applying the responses. For example, you may see that there’s an 85% probability of finishing your project in 22 months, whereas, if you apply the responses, which cost you €80K, you can increase that probability to 98%. Then you can check whether or not it’s worth the investment.

This type of quantitative analysis consumes a lot of resources and you have to make sure you really need it before adding it to your system.