Quantitative Risk Management Versus Qualitative Risk Management
The current emphasis of government and business is on quantitative risk management as practiced by the US Army, the Department of Defense (DoD), and other services
What is the difference between quantitative and qualitative risk management? One type of risk management involves a specific, quantifiable, and measurable measurement of the risk associated with specific events occurring in a specific geographical area. Quantitative risk management uses risk factors as indicators of danger that must be controlled, mitigated, or avoided.
The International Institute for Operations Management (IIOM) has a website to explain this further. essay writing service IIOM states: “Quantitative risk management is a holistic process that considers each aspect of an operational system and identifies the best means to control risk and minimize the impact of risk, while at the same time maximizing results.” This approach considers every aspect of the operational system and applies risk minimization techniques.
IIOM continues: “It is based on the premise that the person who can do the best job of risk management will also know the most about http://www.livemocha.com the operations.” Quantitative risk management is directed at eliminating all the usual risk factors without taking into account all the risks involved with an event. This is often a bad approach, as it does not consider how different operations may be affected by multiple events.
IIOM explains: “In qualitative risk management, no measure is taken of the impact of risks on specific systems in terms of their effects or the economic or human costs they may impose. Rather, the key goal is to ensure that personnel can operate systems to minimize those impacts so that operational systems do not have negative impacts that detract from the end product.”
Two approaches that are based on the notion of quality management are Risk Management Information Systems (RIMS) and Quality Control for Environmental Waste Management (QCEWM). These two approaches consider the entire operations or system but do not consider events that may not be directly related to the operations.
These two approaches, quantitative and qualitative, focus on controlling the risks by minimizing the impact of risk factors. The management approach must not only be able to control the risks that are being measured; it must also be able to apply metrics that lead to an improved operational performance. This requires the implementation of policies, procedures, and tools that include standards for measuring and controlling risks.
Qualitative risk management allows for the application of more than one metric to quantify the risk. It is used by some firms to control more than one type of risk.
If risk quantification is the goal, then quantitative risk management is not the answer. A better way is to create a risk management information system (RIMS) that controls all the risks to various systems and processes. QCEWM or Qualitative Cost Accounting Information System is an example of an integrated resource management information system.
QCEWM was created to achieve the following goals: Improve operational efficiency. Improve financial performance. Reduce the negative impact of safety and risk factors on operations.
QCEWM has three layers of management controls: Organization-wide, Products-based, and Policy-based. Each layer has its own set of standards for controlling risks and quality.
QCEWM is a combination of cost accounting, control of risks, quality control, and production planning. QCEWM has been applied successfully in many industries, including the nuclear industry, railroads, oil fields, and manufacturing plants. The application of QCEWM in the U.S. Air Force, the DoD, and the Marine Corps are just a few examples.
Although not everyone involved in the study of Emg Management (EPM) agrees that the system is technically sound, the Military Industrial and Operational Efficacy Center of Excellence (MIOECE) found that the system offers significant benefits for the US Army. MIOECE reports that operational risk was reduced by 40% when the system was in use. Another benefit: decrease in operational costs.