Definition
Quantitative Risk Analysis is a data-driven approach to evaluating risks using numerical methods like probability modeling and statistical analysis. Unlike qualitative analysis, it assigns exact values to risk probabilities and impacts.
Methods Used in Quantitative Risk Analysis
🔢 Monte Carlo Simulation – Uses random probability distributions to predict project outcomes.
🔢 Expected Monetary Value (EMV) – Calculates potential financial impact of risks.
🔢 Sensitivity Analysis – Examines how changes in variables affect project results.
Example in Action
A construction project assesses a risk of supplier delay using quantitative analysis:
- Probability of delay: 30%
- Cost impact if delayed: $100,000
- Expected cost impact: $30,000 (0.3 × $100,000)
Advantages
✔ Provides data-backed decision-making instead of relying on assumptions.
✔ Helps with budget planning and resource allocation.
✔ Useful for projects with high financial stakes.
