CHAPTER 3 Approaches to Risk Assessment and Quantification

This chapter discusses a variety of approaches that may be taken to risk assessment activities, ranging from those that are informal and unstructured, to those that are structured but purely qualitative, to those that are highly quantitative. We discuss the content, benefits, challenges and requirements of each, and in particular we emphasise some key issues to be aware of when the focus of activities changes from qualitative to quantitative, as may often happen in the later stages of an analysis.

The discussion of various approaches is presented according to the following categories:

  • Informal or intuitive approaches.
  • Risk registers, capturing individual risks but without aggregation:
    • Qualitative approaches for each risk.
    • Quantitative approaches for each risk.
  • Risk registers, focusing – for a particular key variable (such as cost) – on the aggregate impact of all risks on that variable. These approaches are inherently quantitative, and include:
    • Aggregation of impacts of static risk (or average) values.
    • Aggregation of impacts of risk-driven occurrences (using either static or uncertain values of the impact on occurrence).
  • Full (integrated) risk modelling: these capture each risk, its impact and dependencies on all variables of a full quantitative model (e.g. revenue, cost, the time profile of cash flow, etc.); such approaches are the counterpart, or extension, of traditional (static, non-risk) modelling approaches. ...

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