Risk Prioritizing Method at the Stage of Qualitative Risk Analysis in the Process of Project Implementation

Abstract

Current trends in project management include risk management in the process of project implementation. After identifying the risks of the project, the task arises to identify the most dangerous risks for the project out of all numerous risks, in order to subsequently take planned actions to avoid them or reduce their impact. This objective – the task of prioritizing (ranking) risks – is reached at the stage of qualitative risk analysis. As a rule, the danger (importance) of risks is determined by the risk magnitude, which depends on the occurrence probability of a risky event and the impact of risk on the main target parameters of the project. However, due to the peculiarities of the methods of determining the amount of risk at the stage of qualitative analysis, the problems of prioritizing several risks having an equal amount of risk often arise. Moreover, there are no rules or recommendations on how to practically act in such cases and prioritization is carried out with a high degree of subjectivity. Therefore, the purpose of this study is to propose a new risk prioritization method that project teams could practically use at the stage of qualitative risk analysis in these cases. This improvement in qualitative risk analysis methods will expand the ability of project participants to manage risks, reduce subjectivity in decision-making and, accordingly, improve the quality of project implementation. To do this a risk prioritization method based on the use of the analytical hierarchy procedure proposed by T. Saaty is suggested. This method consists in decomposition of the problem to be solved – obtaining hierarchies, and synthesis based on either quantitative estimates or relative judgments. Additional parameters (criteria) are considered for implementation of this method that characterize the compared risks, as well as the value coefficients of these criteria in the overall assessment. Based on the estimates obtained for each criterion and each risk, an overall score is calculated taking into account certain weighting factors of the criteria for each risk. As a result, according to the estimates obtained, risks are prioritized. The use of such a procedure enables reaching a reasonable decision, obtained not by means of simple conclusions, but on the basis of comparative assessments of each risk. This, accordingly, reduces subjectivity of risk prioritization. The proposed method is described in detail in the article and can be used in real projects.