Risk management is about spotting opportunities and enabling executives to act on them. These can be positive or negative – the point of risk management exercises is to identify those elements that should concern decision-makers. It’s about understanding the likelihood of success, ensuring the goals and objectives at hand are the right ones.
To reach this level of clarity, risk managers rely heavily on qualitative risk management, one of the two broad techniques to determine levels of risk. And certainly, across the industry, it’s an accepted fact that you should primarily measure risk in this fashion. Qualitative risk management can create a quick snapshot of risks and opportunities, expressing those findings through heat maps and graphs. The convenience of speed and comprehensibility makes qualitative analysis of risk a must-do exercise for every risk consideration.
“Qualitative risk management is the first place professionals start to assess risk,” explains Sean Pyott, MD of business technology enablement provider, thryve. “This makes a lot of sense because it’s faster. But it’s also preferred because the demands on data are much less onerous. The concept allows for a lot of intuition and speculation, and therefore potential bias. In contrast, quantitative risk management is very data-driven and more demanding to execute correctly. But it’s the more accurate and specific of the two concepts.”
Not every scenario calls for Quantitative Risk (QR) management. Typically, you’re using QR if you need some hard numbers to consider a risk position. QR is often used to predict the success of large projects through cost, time, and scope and the relevant impact of different delays. For example, if a project overran its budget, a QR analysis can explain what factors caused that to happen. Similarly, a QR analysis can predict a project or other significant and complex endeavours’ potential success.
Due to its reliance on statistical data, QR is not a popular choice. But digital data shifted the equation into QR’s favour. Specifically, integrated digital platforms can gather, categorise and present information through several avenues:
- They can integrate with different data sources inside and outside the organisation, collecting what they need.
- The appropriate risk management platform provides customised questionnaires, frameworks and weighting, securely presented to internal and external stakeholders.
- Every business risk platform worth its salt has extensive reporting features that can quickly generate different reports.
In other words, the traditional QR drudgery of collecting, compiling and presenting data becomes automated and fluent across the organisation. And it doesn’t stop there.
QR is a philosophy underpinned by different methodologies, such as Monte Carlo Analysis, Three-Point Estimates, EMV, and Fault Tree Analysis. Each dwells on a different aspect of the answers expected from QR. Manually modelling data to each is time-consuming. But a risk management platform that has different methodology frameworks in place can automatically produce results.
“The difference a digital risk management platform makes is staggering,” says Riaan Bekker, thryve’s Force Solutions Manager. “Risk professionals spend a lot of time on manual preparation, and that limits their space to try out different scenarios or consider more specific requests from the rest of the business. A risk platform can automate all that manual activity. It’s really the best thing that has ever happened to quantitative risk.”
This new angle to QR enables companies to use it more proactively. An area where QR is handy—yet frequently underutilised—is to test and reinforce the findings from qualitative analysis. Risk theory holds that you should use both qualitative and quantitative risk management, which is a smart but often impractical idea.
Not anymore, though. When enabled by a technology platform that integrates and automates risk data management, the Qualitative and Quantitative worlds can finally come together.
thryve designs, implements and supports business transformation, combining our business knowledge and technology platforms. We deliver integrated risk management through Riskonnect, one of the globe’s leading and most innovative risk management platforms. Our expertise includes multiple platform systems, including Salesforce, Tableau and Microsoft Azure. We bring business, data and technology together, tailored for our customers.
The limitations around quantitative risk predictions have fallen away. Use a modern business platform honed by thryve. You can comfortably use qualitative and quantitative risk, enable others to contribute to their success, and arm your leaders with what they need to know.