Interscale Content Hub – Why do we need to weigh up quantitative vs. qualitative risk assessment methods? Both tools help you see things better, but they do so in very different ways.
We can all agree on the value of these two methods for helping organisations identify potential hazards, assess the severity of these risks and develop strategies to mitigate them.
The issue is when we use qualitative and when we use quantitative.
That’s why it’s so important to get to grips with the pros and cons of both approaches if we want to manage risks effectively. Right, let’s get started.
Understanding Risk Assessment Methods
Quantitative Risk Assessment (QRA)
If you like working with numbers and want to be as precise as possible, QRA is the tool for you.
Quantitative Risk Assessment (QRA) uses numbers to assess risk levels.
This method uses statistical models to work out how likely a risk is and how much of an impact it could have.
By turning risk factors into numbers, QRA gives you detailed, data-driven insights that are key for making the right decisions and allocating resources.
The Australian Fisheries Management Authority’s (AFMA) “National Compliance Risk Assessment Methodology 2023-25,” is a great example of this in action.
The AFMA uses a pretty detailed quantitative approach to assess compliance risks in Commonwealth fisheries.
They think about things like how likely it is that a breach will happen and what the consequences might be if it does, and they give each one a number.
This lets them put together a ‘risk matrix’ that shows the level of risk involved in different activities.
It’s like having a spreadsheet for risk, which helps you make informed decisions based on data, not just your gut feeling.
One example of a QRA in action is the use of Monte Carlo simulations to predict the impact of different risk scenarios.
This approach can be pretty useful in industries like construction, where project delays due to unexpected things like weather can be expensive.
For an overview, have a look at “Why is it Important to Have a Risk Assessment? 4 Things To Be Noted“
Qualitative Risk Assessment (QLRA)
Sometimes, it can be tricky to pinpoint a number when it comes to risk assessment.
So, Qualitative Risk Assessment (QLRA) is all about descriptive evaluations based on expert judgement and experience.
The “Guide for Conducting Risk Assessments” from the National Institute of Standards and Technology (NIST) says that QLRA uses words like “high”, “medium”, or “low” to assess risks.
It’s a bit like an experienced bushwalker assessing the terrain. They might not have exact measurements, but their experience allows them to make informed judgments about the potential challenges ahead.
For instance, the Australian Cyber Security Strategy might use QLRA to assess potential threats to national infrastructure based on the likelihood and impact of cyber-attacks.
Experts might look at things like what their opponents are trying to achieve and what the consequences of a successful attack could be.
Differences Between Quantitative and Qualitative Methods
The difference between Quantitative Risk Assessment (QRA) and Qualitative Risk Assessment (QLRA) is similar to the main difference between the worlds of numbers and narratives.
AFMA is a great example of a quantitative approach. AFMA is really precise about assigning numbers to how likely something is to happen and how bad the consequences would be. This lets them work out an overall risk rating.
This numerical precision makes it easier to make objective comparisons and prioritise, which is important in the complex world of fisheries management where decisions can have a big impact on the environment and the economy.
The ‘risk matrix’ used by AFMA, with its colour-coded risk levels, turns raw data into a visual representation, which makes it easier to communicate and make decisions.
On the other hand, the “Guide for Conducting Risk Assessments” by NIST shows how the qualitative approach relies on expert judgement and experience.
It recognises that it can be difficult to assess certain risks, particularly those involving complex socio-technical systems.
The guide makes a point of saying how important it is to make sure that qualitative values are clearly defined and that examples are given to provide context.
This helps to ensure that assessments are as consistent and repeatable as possible, even in the absence of numerical precision.
The 2023–2030 Australian Cyber Security Strategy goes a long way towards showing how important these two approaches really are.
That’s why, the best approach is to recognise the value of both methods and use them in different situations, depending on the type of risk, the resources available and the decision-making needs.
Advantages and Disadvantages
AFMA shows how quantitative risk assessment can be a powerful tool. AFMA makes it possible to compare and prioritise different risks by assigning numerical values to the factors involved.
This is really useful in this context, where managing compliance risks across different fisheries requires a data-driven approach to make sure fishing practices are sustainable.
Being able to express risk in concrete terms, often monetary, makes it easier to communicate and make informed decisions, especially when resources are limited.
However, as NIST points out, this precision comes at a cost.
The quantitative approach can be pretty time-consuming and resource-intensive, especially when you’re dealing with lots of data.
It might also have trouble capturing the subtleties of risks that aren’t easily quantifiable, such as reputational damage or the impact of emerging technologies.
On the other hand, the qualitative approach, as highlighted in the NIST guide, offers a simplicity and agility that can be really valuable in certain situations.
It’s like a seasoned captain navigating by the stars – using experience and judgement to chart a course through uncertain waters.
The Australian Cyber Security Strategy backs this up, saying the qualitative approach is a good fit for risks that are “difficult to quantify” or when you just need a quick overview.
This flexibility means you can assess risks quickly, which is really useful in fast-paced environments or when you’re dealing with new threats where data might be scarce.
However, the strategy also says that there might be some subjectivity and bias in qualitative assessments.
It can be harder to compare and prioritise because there aren’t any numbers to work with, and the fact that experts are involved can make the results vary a bit.
How to Choose the Right Method
There’s no one-size-fits-all answer when it comes to choosing between quantitative and qualitative risk assessment.
The Australian Cyber Security Strategy says the best approach depends on factors such as the type of risk, the available resources, and the decision-making process.
NIST also says you can do risk assessments in whatever way suits your organisation best.
Another big factor to think about is the complexity of the project.
Large, complex projects with a lot at stake often work best with a QRA that’s as precise and objective as possible.
The numbers produced by a QRA can help us work out the complex web of risks involved in such projects.
However, the NIST guide reminds us this approach is not without its drawbacks. It can be time-consuming and resource-intensive.
If you’re short on time or money, the qualitative approach might be a better fit.
The type of risk involved is also a factor. Some risks are easier to quantify than others.
Financial risks are a great fit for QRA because their impact can be expressed in monetary terms.
However, a QLRA might be a better fit for risks with more of a subjective or intangible element, as it relies on expert judgement.
Ultimately, what you need to make decisions should be a factor in your choice.
The numbers you get from a QRA can be very useful if you need solid proof to back up your decisions.
But if you’re just getting started and need a quick assessment to help you determine your initial direction, QLRA can provide valuable insights without the hassle of collecting and analysing a lot of data.
Just remember, you don’t have to be too rigid in your approach. A combination of QRA and QLRA is often the best way to manage risk.
It’s important to know the pros and cons of each method and to adapt your approach to suit the specifics of your project.
For an overview of Microsoft EMM, kindly check “The Purpose of IT Risk Assessment: Business Data is Your Peace of Mind.”
Get a Support System for Qualitative and Quantitative Risk Assessment Methods
As you can see, the landscape for IT risk assessment is pretty complex and always keeping us on our toes.
A lot of businesses find it tough to keep up, especially with limited resources and expertise.
So what’s the result? There’s a greater chance of cyber threats and potential breaches.
That’s why we at Interscale are here to help. We’ll support you in getting to grips with the ins and outs of IT risk assessment.
We’ll work with you to figure out what your business needs and put together a cybersecurity strategy that’s right for you.
Our team can show your employees how to spot and deal with threats before they become problems.
For instance, we’ve helped companies like Davey Water Products beat some big cybersecurity issues, keeping their systems and data safe.
If you’d like to get a feel for how we can help, we invite you to visit our Interscale Cybersecurity Services page, where you can find out what we can do for you.
Or perhaps you’d like to grab a coffee and croissants? Our team would love to catch up with you.
Let’s get in touch so we can have a conversation about your particular risk assessment issues. We’ll show you how Interscale can be your go-to for all things IT risk assessment.
In Closing
Picking the right method or a combo of both can make a big difference in how well a project goes.
If you get to grips with the ins and outs of each method and use the right tools, like Interscale’s EMM solutions, you can make sure your projects stay on track and succeed.
If you’re not sure about quantitative vs. qualitative risk assessment methods, it probably means you don’t fully understand your company’s strengths and weaknesses.
