Project management is not a new discipline, but it is evolving and as a project manager you need to understand all the tools that a modern project manager has at their disposal. There are plenty of project management courses that you can rely on to upgrade your arsenal of project management tools and techniques. One of the tools that you will get acquainted with is the tornado diagram.
What is a Tornado Diagram?
A Tornado diagram is a useful tool for project managers to assess risks associated with a project. A Tornado diagram is a bar chart that visually displays the magnitude of each risk in a descending order. This gives it the shape of a funnel that looks like a tornado. These are useful project management tools when making decisions and assessing risks at various stages of the project. The biggest risk is shown at the top of the chart, and it will have the biggest spread. This is the risk that deserves the most attention.
Why Use Tornado Diagram Quantitative Risk Analysis?
Any project that you work with is bound to have several risks associated with it. It could be hard for you to keep track of all these risks till you find a way to prioritize them. Therefore, you should rank the risks according to their magnitude and severity of impact. Risks have rewards as well as losses associated with them. If you decide to use a new vendor for a project hoping to save costs, you also bear the risk of not meeting the expected quality. The cost of the risk and the benefit associated with it needs to be calculated. Putting it on a bar chart helps you prioritize the risks based on their potential impact.
A representation of the risks in a tornado diagram lets you manage risks and take timely decisions in the interest of the project. Normally the magnitudes of the risks and rewards are proportional.
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How to Read a Simple Tornado Diagram?
While looking for examples of tornado diagrams, people often search for tornado pmp and tornado diagram pmp, but these diagrams are not limited to pmp alone. They can be used for risk assessment outside of project management too.
A tornado diagram like the one given above gives the risks and rewards on either side of the chart. The risk is represented on the left and the reward is shown on the right side. As you can see the risks and rewards appear to be proportional to each other. Risk 7 has the lowest risk and reward. The risk is greater than the reward. This risk is not worth taking because it is a bigger risk than the reward it promises. Even if it succeeds the reward does not make a significant difference in the bigger picture. You should focus more of your time on the top 3 or Top 4 items that promise a bigger reward and hence are decisions that require more scrutiny. They also have a significantly higher level of reward when compared to potential loss.
This is not to say that risks at the top must be taken. The chart is only one of the many tools available for you to assess risks the decisions to be taken may depend on several other factors, but the chart lets you know which decisions are more important to you and how much time should you spend scrutinizing each option.
Sensitivity Analysis Using Tornado Diagram
Sensitivity analysis is a concept in risk management for projects. It quantifies risks in terms of how decisions are likely to impact a project and to what degree. This is not always calculated in terms of monetary value; it can also be calculated in terms of time. Especially in cases where project completion or project goals are time bound or are sensitive to time.
Tornado diagram plays a key role in prioritizing these risks and helping you assess which risks are worth taking for the project and which are the ones that do not deserve much attention. If you are managing the project without using such tools you may still make the right decisions, but it is more likely that you might overlook certain risks or spend too much time analyzing risks of insignificant magnitudes. All major training programs in project management like PMP certification cover these concepts as it has proved to be helpful to project managers.
Creating a Tornado Diagram Template in MS Excel
We can create Tornado diagrams easily in an excel sheet.
Step 1: For creating a Tornado diagram, you will need a set of risks. Let us list 10 risks
Step 2: Add two sets of values to each item in the excel sheet, risks will be expressed as negative values and rewards will be positive values
Step 3: Sort the items according to the magnitude of risk as shown in the image below
| Item | Risk | Reward |
| H | -50 | 250 |
| J | -200 | 150 |
| D | -250 | 1250 |
| E | -300 | 290 |
| I | -500 | 800 |
| G | -1100 | 3000 |
| F | -1500 | 2000 |
| B | -3000 | 4000 |
| A | -5000 | 8000 |
| C | -8000 | 12000 |
Step 4: Create a stacked bar chart
Step 5: Format the axis so that the labels appear on the left
You should have a chart that looks like this:
Tornado Diagram in PMP Exam Questions
As a key tool in risk management, tornado diagrams and related concepts can be important topics to understand if you are preparing for the PMP exam or other project management certifications. As these exams can test your project management skills comprehensively, proficiency in topics like this will come in handy not just in clearing exams but also in managing projects that have a set of complex risks associated with them. If you enroll in a program like the KnowledgeHut PMP certification training, you will get hundreds of test questions and sufficient mock tests to prepare you for the exam, especially when it comes to concepts like tornado diagrams.
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Tornado Diagram Alternatives
While it is important to understand the tornado diagram, there may be times when you need an alternate method. There are other ways you can use to deal with problems that you would address with a tornado diagram.
1. Butterfly Chart
Butterfly charts are a slight variation on tornado charts. Tornado charts are a type of butterfly chart. The only thing making it different is that the values are sorted in a descending order and for a butterfly chart the values are not sorted. It still serves the purpose in cases where something other than the magnitude must be prioritized or if you prefer the butterfly chart to view all the risks.
2. Decision Tree
A Decision tree is a tool which you can use to take decisions and see the outcomes on a chart. It has a tree structure that grows horizontally with more options adding branches to the decision tree. It is useful when you must consider multiple outcomes.
3. Scatter Diagram
A Scatter diagram can put items as marks on a chart showing the risk and reward for each. With this display, you could pick out items with the lowest risks and highest rewards and focus on implementing those for your project.
4. Influence Diagrams
An influence diagram is a tool with which you can also include the probability of risks and how different components and outcomes influence each other.
5. Spider Charts
Spider charts are used to show various aspects of the same variable against preset parameters. The resulting chart looks like a spider web and hence the name.
Frequently Asked Questions ( FAQs)
1. Why Tornado Charts are important
Projects keep getting larger and more complex. As organizations continue to grow and scale up complexity of projects keep increasing. A project manager cannot stay on top of all the risks that a project may encounter. Tools like tornado diagrams make a significant difference by showing you where you should pay attention and what decisions must be taken to benefit the project while taking only manageable levels of risk.
2. What is Tornado diagram in PMP?
A Tornado diagram is a bar chart that helps project managers with the sensitivity analysis to determine the impact of various risks on a project. This is placed in descending order so that the project manager can take decisions on the high impact items first.
3. How does a tornado diagram work?
A tornado diagram lists the various risks in a project and their potential rewards. This will help project managers prioritize according to the magnitude of the risks.
4. How do you read a tornado diagram?
A tornado diagram lists risks in the descending order of their magnitude. On the left side of the chart, you will see the magnitude of the risk and on the right side you will see the magnitude of the reward that can be expected.
5. What is a tornado chart sensitivity analysis?
Tornado carts are used in risk management of projects. Sensitivity analysis is a discipline that strives to understand the risk in quantitative terms. Tornado diagram is one of the tools used in sensitivity analysis.
6. Which chart is best for sensitivity analysis?
Tornado diagrams are so commonly used for sensitivity analysis, that these terms are often used interchangeably. The data for sensitivity analysis can be plotted on many kinds of charts depending on what format suits you the most.
7. How do you read a sensitivity analysis in a tornado diagram?
A sensitivity analysis as plotted on a tornado diagram shows the biggest risk at the top of the chart, it shows the magnitude of the risk and the potential benefit it can provide in quantitatively. Longer bars on the chart indicate an increase in sensitivity.
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