LEARN. PRACTICE. GROW.Concept and mechanism
Qualitative analysis helps order attention using agreed criteria, consequence, and urgency. Equal scores may hide different response lead times. Quantitative analysis connects assumptions to numerical outcomes but needs to state what is included. If failure probability is 20% with a EUR50,000 loss and zero loss otherwise, expected loss is EUR10,000. That average does not mean the actual event will cost EUR10,000. To assess a response, include its certain cost and expected residual loss. A EUR4,000 test reducing probability of a EUR60,000 loss from 20% to 5% changes expected cost from EUR12,000 to EUR7,000.
Guided application
Lowest expected cost does not decide alone: outage limits, capacity to absorb losses, and authority remain relevant. Simulation produces a distribution conditional on data and assumptions. A P80 of 120 days means about 80% of modeled outcomes finish within that duration, not that the project is 80% complete or will finish exactly that day. Check dependencies: two deliveries supported by the same team may suffer joint delays. Do not assign perfect correlation merely because they share a supplier, but do not assume independence without analysis either. More iterations reduce sampling noise; they do not repair a structure omitting the common cause.
Expected cost with response = response cost + expected residual loss, within the model’s explicit assumptions.
Common pitfalls
Average as guaranteed outcome; omitted response cost; percentile as progress; ignored dependence.
Related topics: Compare options and size reserves · Choose and execute responses
Use numbers to clarify decisions and show the conditions under which they are valid.
Reference: Decision tree analysis for the risk averse organization · PMI-RMP five-domain ECO, updated-2024 public document