PMI Risk Management Professional Practice Exam

Which technique is often used to analyze project risks quantitatively?

1. Expert judgment

2. Probability and impact matrix

3. Decision tree analysis

4. SWOT analysis

The correct answer is: Decision tree analysis

Decision tree analysis is a quantitative risk analysis technique that helps project managers evaluate the potential outcomes of various risks associated with a project. It provides a visual representation of different decision paths and their potential impacts based on probabilities and outcomes. Each branch of the tree represents a possible decision or event, along with its associated probability and payoff. This method allows for the systematic evaluation of risks by considering the likelihood of different scenarios and their potential consequences, which makes it particularly useful for informed decision-making. In contrast to other techniques listed, such as expert judgment, which relies heavily on individuals' opinions, or a probability and impact matrix, which provides a qualitative approach by categorizing risks but does not quantify them specifically, decision tree analysis stands out for its ability to incorporate numerical data and probabilities into the risk analysis process. SWOT analysis, focusing on identifying strengths, weaknesses, opportunities, and threats, is also qualitative in nature and typically does not lend itself to the quantitative analysis required for comprehensive risk assessment. Thus, decision tree analysis is the correct choice when discussing techniques aimed at quantitatively analyzing project risks.