What is quantitative risk analysis?

Quantitative risk analysis is a process that numerically analyzes the effect of risks on project objectives. This method involves assigning numerical values to the likelihood of risks and their potential impacts, allowing project managers to assess the overall risk exposure in measurable terms. By employing statistical techniques, such as Monte Carlo simulations, decision trees, or sensitivity analysis, this approach provides a data-driven basis for understanding how risks might influence various project outcomes, including cost, time, and performance.

Successful quantitative risk analysis helps project managers make informed decisions regarding risk management strategies by illustrating the potential consequences of uncertainties and enabling prioritization based on rigorous data rather than subjective judgment. This process is essential for projects with substantial complexity, where risks can significantly affect the completion and success of the project goals.