What is the difference between qualitative and quantitative risk analysis?

The choice that states qualitative analysis assesses risk based on likelihood and impact, while quantitative utilizes numerical methods, is correct because it clearly delineates the fundamental approaches of these two types of risk analysis.

Qualitative risk analysis involves the evaluation of risks based on subjective measures, primarily assessing the likelihood of risks occurring and their potential impact on project objectives. This process often incorporates tools such as risk matrices or expert judgment to prioritize risks without relying on numerical data. It provides a high-level view of the risks associated with a project.

On the other hand, quantitative risk analysis employs statistical and mathematical techniques to evaluate risks quantitatively. It analyzes numerical data to estimate potential outcomes of risks, often using methods such as Monte Carlo simulations or decision tree analysis. This results in precise numerical estimates of the probability of risks and their financial impacts.

By contrasting the qualitative and quantitative methods, the selected answer effectively highlights how these approaches are fundamentally different in their analysis and application within risk management.