Differences Between Qualitative and Quantitative Risk Management

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QUALITATIVE
QUANTITATIVE
RISK MANAGEMENT
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QUALITATIVE
RISK MANAGEMENT
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An approach to assessing and managing risks that
relies on subjective judgment and descriptive
analysis. It uses qualitative scales or
categories, like "low," "medium," or "high" risk,
to provide a qualitative understanding of the
risks associated with a project or
decision-making process.
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METHODS
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BRAINSTORMING
Gather a group of experts and stakeholders
to generate a list of potential risks
DELPHI TECHNIQUE
Structured approach for gathering and distilling
an expert panel's opinion on potential risks
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RISK MATRICES
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Risks are plotted on a matrix based on their
likelihood and impact, with categories like low,
medium, and high-risk
SWOT ANALYSIS
Strategic planning tool helps organizations
identif internal and external strengths,
weaknesses, opportunities, and threats
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USES
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01
Quickly identifies and categorizes risks
Provides an initial risk assessment in the
absence of detailed data
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Prioritizes risks based on subjective judgment
Helpful in making quick, high-level
decisions about risk
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QUANTITATIVE
RISK MANAGEMENT
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A data-driven approach to assessing
and mitigating risks that involves assigning
precise numerical values to risks as well as
associated parameters like probabilities and
monetary implications. This approach uses
quantitative data and mathematical models to
quantify and analyze risks precisely.
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METHODS
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MONTE CARLO SIMULATIONS
Uses random sampling to assess various scenarios
and probabilities
DECISION TREES
Constructs decision trees to map out optimal
choices and their associated risks and rewards
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MATHEMATICAL MODELING
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Uses complex mathematical models to assess
risks, especially in financial engineering
domains quantitatively
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USES
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Precisely quantify and analyze risks
using numerical values
01
Assess the likelihood and impact of risks in a
data-driven manner
02
Analyze complex projects and financial decisions
with precision
03
Facilitate risk comparisons and prioritize
mitigation efforts
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