11. Project Risk Management Terms

Question 1

Acceptance

Answer 1

A risk response appropriate for both positive and negative risks, but often used for smaller risks within a project.

Question 2

Ambiguity risks

Answer 2

Risks that have an uncertain, unclear nature, such as new laws or regulations, the marketplace conditions, and other risks that are nearly impossible to predict.

Question 3

Avoidance

Answer 3

A risk response to avoid the risk.

Question 4

Brainstorming

Answer 4

The most common approach to risk identification; usually completed by a project team with subject matter experts to identify the risks within the project.

Question 5

Business risks

Answer 5

These risks may have negative or positive outcomes. Examples include using a less experienced worker to complete a task, allowing phases or activities to overlap, or forgoing the expense of formal training for on-the-job education.

Question 6

Cardinal scales

Answer 6

A ranking approach to identify the probability and impact by using a numerical value, from .01 (very low) to 1.0 (certain).

Question 7

Checklists

Answer 7

A quick and cost-effective risk identification approach.

Question 8

Data precision

Answer 8

The consideration of the risk ranking scores that takes into account any bias, the accuracy of the data submitted, and the reliability of the nature of the data submitted.

Question 9

Decision tree

Answer 9

A method to determine which of two or more decisions is the best one. The model examines the costs and benefits of each decision’s outcome and weighs the probability of success for each of the decisions.

Question 10

Delphi Technique

Answer 10

An anonymous method of querying experts about foreseeable risks within a project, phase, or component of a project. The results of the survey are analyzed by a third party, organized, and then circulated to the experts. There can be several rounds of anonymous discussion with the Delphi Technique, without fear of backlash or offending other participants in the process. The goal is to gain consensus on project risks within the project.

Question 11

Enhancing

Answer 11

A risk response that attempts to enhance the conditions to ensure that a positive risk event will likely happen.

Question 12

Escalating

Answer 12

A risk response that is appropriate for both positive and negative risk events that may outside of the project manager’s authority to act upon.

Question 13

Expected monetary value (EMV)

Answer 13

The monetary value of a risk exposure based on the risk’s probability and impact in the risk matrix. This approach is typically used in quantitative risk analysis because it quantifies the risk exposure.

Question 14

Exploit

Answer 14

A risk response that takes advantage of the positive risks within a project.

Question 15

External risks

Answer 15

These risks are outside of the project, but directly affect it—for example, legal issues, labor issues, a shift in project priorities, or weather. “Force majeure” risks call for disaster recovery rather than project management. These are risks caused by earthquakes, tornadoes, floods, civil unrest, and other disasters.

Question 16

Flowcharts

Answer 16

System or process flowcharts show the relationship between components and how the overall process works. These are useful for identifying risks between system components.

Question 17

Influence diagrams

Answer 17

An influence diagram charts out a decision problem. It identifies all of the elements, variables, decisions, and objectives and also how each factor may influence another.

Question 18

Ishikawa diagrams

Answer 18

These cause-and-effect diagrams are also called fishbone diagrams and are used to find the root cause of factors that are causing risks within the project.

Question 19

Low-priority risk watch list

Answer 19

Low-priority risks are identified and assigned to a watch list for periodic monitoring.

Question 20

Mitigation

Answer 20

A risk response effort to reduce the probability and/or impact of an identified risk in the project.

Question 21

Monte Carlo technique

Answer 21

A simulation technique that got its name from the casinos of Monte Carlo, Monaco. The simulation is completed using a computer software program that can simulate a project, using values for all possible variables, to predict the most likely model.

Question 22

Ordinal scales

Answer 22

A ranking approach that identifies and ranks the risks from very high to very unlikely or to some other value.

Question 23

Organizational risks

Answer 23

The performing organization can contribute to the project’s risks through unreasonable cost, time, and scope expectations; poor project prioritization; inadequate funding or the disruption of funding; and competition with other projects for internal resources.

Question 24

PESTLE

Answer 24

A prompt list used for risk identification. PESTLE examines risks in the Political, Economic, Social, Technological, Legal, and Environmental domains.

Question 25

Probability and impact matrix

Answer 25

A matrix that ranks the probability of a risk event occurring and its impact on the project if the event does happen; used in qualitative and quantitative risk analyses.

Question 26

Project management risks

Answer 26

These risks deal with faults in the management of the project: the unsuccessful allocation of time, resources, and scheduling; unacceptable work results; and poor project management.

Question 27

Pure risks

Answer 27

These risks have only a negative outcome. Examples include loss of life or limb, fire, theft, natural disasters, and the like.

Question 28

Qualitative risk analysis

Answer 28

This approach “qualifies” the risks that have been identified in the project. Specifically, qualitative risk analysis examines and prioritizes risks based on their probability of occurring and their impact on the project should they occur.

Question 29

Quantitative risk analysis

Answer 29

This approach attempts to numerically assess the probability and impact of the identified risks. It also creates an overall risk score for the project. This method is more in-depth than qualitative risk analysis and relies on several different tools to accomplish its goal.

Question 30

RAG rating

Answer 30

An ordinal scale that uses red, amber, and green (RAG) to capture the probability, impact, and risk score.

Question 31

Residual risks

Answer 31

Risks that are expected to remain after a risk response.

Question 32

Risk

Answer 32

A project risk is an uncertain event or condition that can have a positive or negative impact on the project.

Question 33

Risk identification

Answer 33

The systematic process of combing through the project, the project plan, the work breakdown structure, and all supporting documentation to identify as many risks that may affect the project as possible.

Question 34

Risk management plan

Answer 34

A project management subsidiary plan that defines how risks will be identified, analyzed, responded to, and monitored within the project. The plan also defines the iterative risk management process that the project is expected to adhere to.

Question 35

Risk management planning

Answer 35

The agreed-upon approach to the management of the project risk processes.

Question 36

Risk owners

Answer 36

The individuals or entities that are responsible for monitoring and responding to an identified risk within the project.

Question 37

Risk register

Answer 37

The risk register is a project plan component that contains all of the information related to the risk management activities. It’s updated as risk management activities are conducted to reflect the status, progress, and nature of the project risks.

Question 38

Risk report

Answer 38

The risk report explains the overall project risks and provides summaries about the individual project risks.

Question 39

Risk response audit

Answer 39

An audit to test the validity of the established risk responses.

Question 40

Risk responsibilities

Answer 40

The level of ownership an individual or entity has over a project risk.

Question 41

Risk score

Answer 41

The calculated score based on each risk’s probability and impact. The approach can be used in both qualitative and quantitative risk analysis.

Question 42

Root cause identification

Answer 42

Root cause identification aims to find out why a risk event may be occurring, the causal factors for the risk events, and then, eventually, how the events can be mitigated or eliminated.

Question 43

Secondary risks

Answer 43

New risks that are created as a result of a risk response.

Question 44

Sensitivity analysis

Answer 44

A quantitative risk analysis tool that examines each risk to determine which one has the largest impact on the project’s success.

Question 45

Sharing

Answer 45

A risk response that shares the advantages of a positive risk within a project.

Question 46

SWOT analysis

Answer 46

SWOT analysis is the process of examining the project from the perspective of each characteristic: strengths, weaknesses, opportunities, and threats.

Question 47

TECOP

Answer 47

A prompt list used in risk identification to examine the Technical, Environmental, Commercial, Operational, and Political factors of the project.

Question 48

Technical, quality, or performance risks

Answer 48

Technical risks are associated with new, unproven, or complex technologies being used on the project. Changes to the technology during the project implementation can also be a risk. Quality risks are the levels set for expectations of impractical quality and performance.

Question 49

Transference

Answer 49

A risk response that transfers the ownership of the risk to another party. Insurance, licensed contractors, or other project teams are good examples of transference. A fee and contractual relationships are typically involved with the transference of a risk.

Question 50

Variability risks

Answer 50

A type of risk based on the variations that may occur in the project, such as production, number of quality errors, or even the weather.

Question 51

VUCA

Answer 51

A prompt list used in risk identification that examines the Volatility, Uncertainty, Complexity, and Ambiguity of risk factors within the project.