What is the difference between qualitative and quantitative risk analysis?

The distinction between qualitative and quantitative risk analysis is crucial for effective risk management in any project. Qualitative analysis primarily focuses on evaluating risks using subjective judgment and expert opinions, often categorizing them based on their probability of occurrence and their potential impact. This process typically involves ranking risks in terms of severity and helps prioritize them for further action without relying on numerical data.

On the other hand, quantitative risk analysis takes a more data-driven approach, employing numerical techniques to quantify risks, assess their potential impact in monetary terms, and evaluate their probability. This method allows for more precise estimations of risk exposure and aids in decision-making by providing a statistical basis for understanding the project's potential uncertainties.

The correct choice highlights this fundamental difference in approach between the two methodologies, helping project managers and stakeholders understand how to apply each method appropriately based on the context and specific needs of the project. This understanding allows for a more comprehensive risk management strategy that aligns qualitative insights with quantitative measures, ultimately leading to more informed decisions.