9 | Planning for Risk

Question 1

Risk?

Answer 1

A risk is an uncertain event that may have either a positive or negative effect on the project. Its
primary components are a measure of probability that a risk will occur and the impact of the risk on
a project.

Question 2

Some common ways to classify risk are?

Answer 2

1. Effect based classification
2. Source based classification
3. Level of uncertainty

Question 3

Negative Risks?

Answer 3

Negative risks are risks that have a negative impact on the project. These can also be referred to as threats. Project managers strive to prevent these risks from occurring or reduce their impact.

Question 4

Positive Risks?

Answer 4

Positive risks are risks that when taken, produce a positive project outcome. These can also be referred to as opportunities.

Question 5

Effect-Based Risk Classification?

Answer 5

Is a method of analyzing the way that risks to a project could impact its success. A risk can have an effect on time, cost, quality, and scope. All these effects are interrelated; therefore, any changes to one element will affect all the others.

A project manager may choose to use effect-based risk classification for a complex project in which many of the risk factors are interrelated, such as a large-scale corporate endeavor or initiative in which many departments, teams, and external resources are participating. Any one department’s failure to produce will impact on the rest of the project.

Question 6

Source-Based Risk Classification?

Answer 6

Is a method of analyzing risk in terms of its origins. Sources may be internal or external to the project, and technical, nontechnical, industry-specific, or generic.
For a project requiring internal and external resources, such as an advertising campaign, a project manager may classify the risks in terms of where they originate. One source of risk could be the potential rise in the price of advertising time on network television, which could affect cost and scope. Another source of risk could be the failure of an external advertising agency to meet its
deadlines, which would affect the schedule and scope.

Question 7

Project risks are of two types?

Answer 7

1. Business risk

2. Insurable risk

Question 8

Business Risk?

Answer 8

A business risk is one that is inherent in a business endeavor, such as when a company assumes that it will spend money and make money, and that any project undertaken carries with it the potential for success or failure, profit or loss.

Question 9

Insurable Risk?

Answer 9

Insurable risk is a risk that has only the potential for loss and no potential for profit or gain. An insurable risk is one for which insurance may be purchased to reduce or offset the possible loss?

Question 10

What are the 4 business risk types?

Answer 10

1. Competitive
2. Legislative
3. Monetary
4. Operational

Question 11

Competitive business risk?

Answer 11

Risks such as the risk of increased competition in the marketplace and a rival company developing a superior product.

Question 12

Legislative business risk?

Answer 12

Risks such as the risk of new laws or changes in regulations governing your products, goods, or services, that require your company to spend more to maintain compliance.

Question 13

Monetary business risk?

Answer 13

Risks such as the risk of increased prices for raw materials, increased taxes, increased operating costs, and losses due to nonpayment by customers.

Question 14

Operational business risk?

Answer 14

Risks such as the risk of fraud, theft, employee injury, workplace accidents, and damage to equipment.

Question 15

What are the 4 types of insurable risk?

Answer 15

1. Direct property
2. Indirect property
3. Liability
4. Personnel-related

Question 16

Direct property insurable risk?

Answer 16

Risk of property damage due to weather, fire, and so on.

Question 17

Indirect property insurable risk?

Answer 17

Risk of additional expenditures needed to recover from property loss.

Question 18

Liability insurable risk?

Answer 18

Risk of needing to make good after causing damage to another.

Question 19

Personnel-related insurable risk?

Answer 19

Liability risk for damage to employees.

Question 20

Probability Scales?

Answer 20

A probability scale is a graph showing the assignment of value to the likelihood of a risk occurring. Probability scales are designed using a variety of values, such as linear, nonlinear, or an ordinal scale using relative probability values ranging from not very unlikely to almost certain. A risk’s probability score can range in value from 0.0 (no probability) to 1.0 (certainty). While this is a common way to assign probability, any other set of values can be used instead—for example one to five, or one to
ten.

Question 21

What are the 4 Principle of Probability?

Answer 21

1. Sum of probabilities
2. Probability of single event
3. Mean
4. Median
5. Standard deviation

Question 22

Sum of probabilities?

Answer 22

The sum of the probabilities of all possible events must be equal to 1 (100%).

Question 23

Probability of single event?

Answer 23

The probability of any single event must be greater than or equal to 0 and less than or equal to 1.

Question 24

Mean?

Answer 24

The sum of the events divided by the number of occurrences.

Question 25

Median?

Answer 25

The number that separates the higher half of a probability distribution from the lower half. It is not the same as the average, although the two terms are often confused.

Question 26

Standard deviation?

Answer 26

This is the measure of the spread of the data, or the statistical dispersion of the values in your data set.

Question 27

Probability Distribution?

Answer 27

Probability distribution is the scattering of values assigned to likelihood in a sample population. It can be visually depicted in the form of a Probability Density Function (PDF). In a PDF, the vertical axis refers to the probability of a particular value that is depicted on the horizontal axis. The zero on the horizontal axis represents the mean, and the plus and minus numbers represent standard
deviations from the mean.

Question 28

Probability can be assigned?

Answer 28

1. Subjectively

2. Objectively

Question 29

Subjective probability?

Answer 29

Is based on people’s opinions, which may be shaped by information, experience, and attitude. Even if they are given the same set of facts, they may make very different determinations of the probability of an event.

Question 30

Objective probability?

Answer 30

Objective probability is deduced mathematically.

Question 31

The Normal Distribution PDF?

Answer 31

A normal distribution PDF results when there is a symmetrical range or variation in the probabilities of each outcome. Visually, the data is distributed symmetrically in the shape of a bell with a single peak, resulting in the common term bell curve. The peak represents the mean; the symmetry indicates that there are an equal number of occurrences above and below the mean.

Question 32

The Triangular Distribution PDF?

Answer 32

A triangular distribution PDF results when there is an asymmetrical distribution of probabilities. Visually, the data is skewed to one side, indicating that an activity or element presents relatively little risk to project objectives. If either the probability of occurrence is low or the impact is low, then this necessarily indicates that there is little risk.

Question 33

Impact Scale?

Answer 33

is a rating system of values that reflect the magnitude of the impact of a risk event on project objectives. The impact scale can be ordinal, using values of very low, low, moderate, high, and very high. Numbers are assigned to these values. To improve the integrity and quality of the
data and make the processes consistent and repeatable, organizations typically develop definitions for each value to help the risk management team assign each risk’s impact score consistently.

Question 34

What are the 5 impact ratings?

Answer 34

1. 1 - Very low
2. 3 - Low
3. 5 - Moderate
4. 7 - High
5. 9 - Very high

Question 35

Impact Rating | 1 - Very low?

Answer 35

If this risk occurs, the impact on the project’s objectives would be minor and not noticeable outside the project

Question 36

Impact Rating | 3 - Low?

Answer 36

If this risk occurs, the impact on the project’s objectives would be minor but noticeable to the customer or sponsor.

Question 37

Impact Rating | 5 - Moderate?

Answer 37

If this risk occurs, the impact to the project’s objectives would be significant and would create customer or sponsor dissatisfaction with the project.

Question 38

Impact Rating | 7 - High?

Answer 38

If this risk occurs, the impact on the project would be significant and would create major customer or sponsor dissatisfaction. The project would be in jeopardy.

Question 39

Impact Rating | 9 - Very high?

Answer 39

If this risk occurs, the impact would be catastrophic. The project would be cancelled.

Question 40

Levels of Uncertainty?

Answer 40

Levels of uncertainty describe the risks of a project based on how much is known about the source and effect of the risk.

Question 41

What are the 3 Levels of Uncertainty?

Answer 41

1. Knowns
2. Known-unknowns
3. Unknown-unknowns

Question 42

Level of Uncertainty | Known?

Answer 42

Items that you know could affect you, and for which you can roughly predict the nature and extent of the effect.

Example: A 50% staff turnover in the fast food industry.

Question 43

Level of Uncertainty | Known-unknown?

Answer 43

Items that you know could affect you, although you are not able to predict how or how much they will affect you.

Example: Competition in the marketplace.

Question 44

Level of Uncertainty | Unknown-unknown?

Answer 44

Items that are beyond your ability to foresee, predict, or prepare for.

Example: Hurricane Katrina in the U.S. in 2005.

Question 45

The Project Risk Management Process?

Answer 45

The project risk management process is a high-level process that includes the following outputs:

1. Risk management planning
2. Risk identification
3. Qualitative risk analysis
4. Quantitative risk analysis
5. Risk response planning

Question 46

Risk Management Plan?

Answer 46

A risk management plan is a document that describes the team’s approach to manage risks. It determines the methodology, approaches, and tools that will be used; documents the roles and responsibilities of those involved; identifies the budgeting and the scheduling for risk management activities; and lists the risk categories.

Question 47

Risk Management Plan Components?

Answer 47

1. Methodology:
   Defines the tools, approaches, and data sources that may be used to perform risk management on the project.
2. Roles and responsibilities:
   Defines the lead, support, and risk management team membership for each type of action in the risk management plan. Participants might include project team members and a risk officer.
3. Definitions of risk probability and impact:
   Scales of risk probabilities and impact are defined for use in qualitative risk analysis using terms such as “very unlikely” to “almost certain” with respective values in numbers for these terms. For instance, “very unlikely” may have 0.05 as a probability value.
4. Probability and impact matrix:
   Predefined matrix with risk priority areas earmarked, which has product of impact value on the X-axis and probability value on the Y-axis.
5. Revised stakeholder tolerances:
   Stakeholder tolerances may need to be updated as a result of planning for risk management.
6. Budgeting:
   A budget for project risk management should be established and included in the risk management plan.
7. Timing:
   Defines how often the risk management activities will be performed throughout the project life cycle.
8. Risk categories:
   Documentation, such as a Risk Breakdown Structure (RBS) or categories from previous projects, will help identify and organize risks.
9. Reporting formats:
   Defines how outputs of this process will be documented, analyzed, and communicated.
10. Tracking:
    Documents how risk activities will be recorded and audited.

Question 48

RBS stands for?

Answer 48

Risk Breakdown Structure

Question 49

Risk Breakdown Structure (RBS)?

Answer 49

Is a hierarchical arrangement of identified risks that helps
project managers to organize potential sources of risk to the project. Functioning much like a WBS, an RBS arranges categories into a hierarchy. This approach allows the project team to define risk at detailed levels.

Question 50

Risk Analysis?

Answer 50

Is the evaluation of the probability and impact of the occurrence of a risk in a project. Risk analysis is typically conducted through either qualitative or quantitative techniques. The level of risk to the project is the product of the probability of the risk occurring and the predicted impact that the risk will have on the project’s success.

Question 51

Risk Tolerance?

Answer 51

Risk tolerance refers to the level of risk acceptable to a project manager or key stakeholder when the investment is compared to the potential payoff.

Question 52

What are the 3 risk tolerance levels?

Answer 52

1. Risk-averter
2. Risk-neutral
3. Risk-seeker

Question 53

Risk-averter?

Answer 53

Not likely to take a risk that is considered a high risk.

Question 54

Risk-neutral?

Answer 54

Tolerance to risk is proportional to the amount of money at stake.

Question 55

Risk-seeker?

Answer 55

Accepts an uncertain outcome and may be willing to take a high risk regardless of the consequences.

Question 56

Triggers?

Answer 56

Are the early warning signs or indications that a risk to your project is about to occur. They could be external factors that influence your project, such as proposed changes in relevant legislation. They could also be internal factors that influence your project, such as proposed changes in staffing, governance, or funding within your organization. Triggers must be examined during regularly scheduled risk review sessions held during the life of the project.

Question 57

Information-Gathering Techniques?

Answer 57

Are methods that are used to collect data that will assist the project team in identifying risks and risk triggers to the project.

Question 58

What are the 4 Information-Gathering Techniques?

Answer 58

1. Brainstorming:
   Used to identify overall project risks or may focus on the risks within a particular project segment or work package
2. Delphi technique:
   Used to generate a consensus among project risk experts who anonymously submit their risk list to a facilitator. Because it relies on achieving consensus, the Delphi technique may be difficult to implement in many organizations.
3. Root cause analysis:
   Used to identify problems, discover the root cause, and develop corrective actions.
4. Interviewing:
   Used to get information from people with wide experience across many projects, such as stakeholders, team members, project managers from previous projects, and functional management peers, to quantify the probability and impact of risk on project objectives. The output is a statistical interpretation of the data from which a range of probability can be expressed against a level of confidence that the risk will or will not occur, such as optimistic or low and pessimistic or high. There are two interviewing methods used for generating risk probabilities: Direct and Diagrammatic.

• Direct: Approaching an expert to assign subjective probabilities to a given range of values, providing a lowest possible value, most likely value, and highest possible value.
• Diagrammatic: Using diagrams to seek advice from an expert to assign subjective probabilities to a given range of values, providing a lowest possible value, most likely value, and highest possible value.

Question 59

Documentation Reviews?

Answer 59

Are the structured reviews of project plans and related documents that are conducted to improve the quality of the documents. They also help in determining if there are any discrepancies between the documents and the stated project requirements, which may be indicators
of project risks.

Question 60

Checklist Analysis?

Answer 60

Is the process of systematically evaluating the pre-created checklists and developing a checklist based on relevant historical information. It serves as a standardized way to
identify risks and is applicable to any process or system, including equipment and human issues. This analysis is generally performed by experts and the quality of evaluation is primarily based on the knowledge and experience of people creating the checklists. It is recommended to review the checklist during project closure and incorporate the lesson learned for future use on projects.

Question 61

The steps involved in checklist analysis include?

Answer 61

1. Determine the process or system of interest.
2. Define the areas of interest.
3. Classify the process or system.
4. Create relevant checklists.
5. Subdivide the elements of the activity or system if necessary.
6. Respond to the questions related to the checklists.
7. Use the results for making validations, recommendations, or improvements

Question 62

Assumptions?

Answer 62

Are statements that must be taken to be true in order to begin project planning.

Question 63

Assumptions analysis?

Answer 63

Is the process of validating the assumptions made during project planning. It involves documenting the assumptions and then determining the risks that may be caused due to inaccuracy, instability, or incompleteness of the project assumptions.

Question 64

Diagramming Techniques are used to identify?

Answer 64

Project risks

Question 65

What are the 2 types of Diagramming Techniques?

Answer 65

1. Cause-and-affect diagrams

2. Flowcharts

Question 66

Cause-and-effect diagrams are used to?

Answer 66

Identify the causes of project risks.

Question 67

Flowcharts are used to?

Answer 67

Identify process elements that have risk associated with them.

Question 68

SWOT Analysis?

Answer 68

Is the process of examining the project from the perspective of strengths, weaknesses, opportunities, and threats. SWOT analysis identifies the objective of the project and the external and internal factors that may positively or negatively impact the project. The analysis can be used for making decisions and developing strategies or plans that help an organization achieve its
business objectives.

Question 69

Risk Registers?

Answer 69

The risk register is a living document that identifies and categorizes risks, potential risk responses, and their triggers, or warning signs. If risk categories are changed, the risk register must be updated. Any possible risk responses included in the risk register are forwarded for use in planning risk responses. The risk register will be updated with the results of other risk management processes and provided to project team members involved in project risk management.

Question 70

Risk Categories?

Answer 70

Risk categories divide project risks into areas reflecting common sources of the risk.

Question 71

What are the 4 Risk categories?

Answer 71

1. Technical, quality, or performance risks:
   • Technical changes.
   • Changes to industry standards during the project.
   • Reliance on unproven or complex technology.
   • Unrealistic performance goals.
2. Project management risks:
   • Inadequate time and resource allocation.
   • Ineffective project plan development.
   • Poor cost estimates.
3. Organizational risks:
   • Resource conflicts with other projects.
   • Inadequate project funding.
   • Inconsistent management support.
4. External risks:
   • Union issues.
   • Change of management in customer’s organization.
   • Regional security issues.

Question 72

Qualitative Risk Analysis?

Answer 72

Is the process of determining the probability of occurrence and the impact of identified risks by using logical reasoning when numeric data is not readily available. This
is then used to determine the risk exposure of the project by multiplying the probability and impact. The qualitative risk analysis process ultimately provides the list of prioritized risks for further actions.

Question 73

Risk Data Quality Assessment?

Answer 73

Is a technique that involves the evaluation of the reliability of the available data concerning a risk. It includes examining the data obtained about a particular risk for
the amount of data available, the quality of data available, the extent to which the source of the information understands the risk, and the legitimacy and dependability of the data.

Question 74

Risk Probability and Impact Assessment?

Answer 74

Is a risk assessment technique that is used to evaluate
the likelihood of occurrence and potential impact of the identified project risks. The risk probability and risk impact factors are often ranked either as very high, high, moderate, low, and very low or else as numbers from one through ten. Then, probability and impact of a risk are
multiplied to identify the risk score, which is used to set the priority for each identified risk. The methods used to assess risk probability and impact include meetings, interviews, expert judgment, and drawing from historical information.

Question 75

Probability and Impact Risk Rating Matrix?

Answer 75

Is a graph showing the assignment of risk rating to
risks or conditions. The matrix combines the probability and impact scales to prioritize and identify risks that are likely to require further analysis. Risk rating is calculated by multiplying the risk’s impact score by its probability score. It may indicate risk thresholds by applying shading, color, or line variations. The probability and impact risk rating matrix will guide the response plans.

Question 76

Urgent risks?

Answer 76

Urgent risks are risks that require immediate attention.

Question 77

Risk Urgency Assessment?

Answer 77

Is the task of evaluating project risks and prioritizing them based on their urgency. The assessment may also include specific information on timing for responding to each risk.

Question 78

What are the 7 risk register analysis?

Answer 78

1. Relative ranking or priority list of project risks:
   The overall risk ranking for a project can be determined by adding the individual risk factor scores and dividing by the number of risks.
2. Risks grouped by categories:
   Placing risks in categories may reveal areas of risk concentration. It may also highlight common causes of risk, allowing you to improve risk anticipation and response.
3. Causes of risk or project areas requiring particular attention:
   Identifying specific frequently occurring causes in risk occurrence enables better risk response planning.
4. Lists of risks requiring response in the near term:
   Some risks may require action in the near term. These can be grouped separately from the risks that will be addressed at a later date.
5. List of risks for additional analysis and response:
   Risks that may require additional analysis and management typically include risks classified as high or moderate. For example, a schedule risk that threatens to delay the project end date beyond acceptable limits will require quantitative analysis.
6. Watchlist of low-priority risks:
   Risks that are not urgent and do not require near-term action can be documented on a watchlist for monitoring.
7. Trends in qualitative risk analysis results:
   As qualitative risk analysis is repeated, a trend may result that can make risk response or further analysis more urgent or less urgent.

Question 79

The Ongoing Risk Assessment Process?

Answer 79

Is an iterative process of identifying, analyzing, and
documenting the risks facing your project; it is conducted throughout the project life cycle. This is primarily an organizational issue that requires the project manager, or the PMO, to have project managers outside the project shadow the project manager and provide oversight and fresh perspective during risk management reviews.

Question 80

Quantitative Risk Analysis?

Answer 80

Is a technique that is used to assess the risk exposure events to overall project objectives and determine the confidence levels of achieving the project objectives.
Quantifying risk can help you identify time and cost contingencies of a project. It further refines and enhances the prioritization and scoring of risks produced during qualitative analysis.

Question 81

What are the 4 Quantitative Risk Analysis Update Components?

Answer 81

1. Probabilistic analysis of the project:
   Once risks are qualitatively and quantitatively analyzed, the project team should be able to forecast the possible completion dates and costs and provide a level of confidence for each.
2. Probability of achieving the cost and time objectives:
   Using quantitative risk analysis, the project team can estimate the likelihood of achieving the project objectives under the current plan and with the current knowledge of the project risks.
3. Prioritized list of quantified risks:
   Identified risks are prioritized according to the threat they pose or the opportunity they present to the project. This prioritized list includes a measure of the impact of each identified risk.
4. Trends in quantitative risk analysis results:
   Repeating the quantitative risk analysis allows the project’s risk management team to analyze the trends and make adjustments as necessary. Information on project schedule, cost, quality, and performance gained when performing quantitative risk analysis will help the team to prepare a quantitative risk analysis report.

Question 82

Project Risk Ranking?

Answer 82

Is the overall risk ranking for producing the final deliverable of the product or service of the project. It allows for comparisons among other projects, assisting in project initiation, budget and resource allocation, and other decisions.

Question 83

Quantitative Analysis Methods?

Answer 83

Allow project managers to consistently determine the probability and impact of each risk.

Question 84

What are the 4 Quantitative analysis methods?

Answer 84

1. Sensitivity analysis
2. Decision tree analysis
3. Simulation
4. Expected Monetary Value (EMV) analysis

Question 85

Sensitivity Analysis?

Answer 85

Is a method of assessing the relative effect of changing a variable in the project to gain an insight into possible outcomes of one or more potential courses of action.
Sensitivity analysis is probably the simplest method of analyzing the impact of a potential risk and its results are easy for project stakeholders to understand. However, it does not lend itself well to assessing combinations of risks and how they may affect a project. Furthermore, the sensitivity diagram does not provide an indication of anticipated probability of occurrence of the risk event.
Often, sensitivity analysis is performed independently on a number of variables. When displayed on a single graph or sensitivity diagram, the results allow you to compare which variables have the highest likely impact on project performance. Typically, it is only performed for variables that are likely to have a major impact on project performance in terms of cost, time, or economic return.

Question 86

Decision Tree Analysis?

Answer 86

Is an assessment of the data obtained using the decision tree method to evaluate various possible outcomes. Decision trees allow decision makers to evaluate both the probability and impact for each branch of every decision under consideration, making it a useful tool
for risk analysis. Solving the decision tree indicates the decision that will provide the greatest expected value when all the uncertain implications, costs, rewards, and subsequent decisions are quantified.

Question 87

Simulation?

Answer 87

Is a technique that uses computer models and estimates of risk to translate uncertainties at a detailed level into their potential impact on project objectives. For schedule development, simulation involves calculating multiple project duration with varying sets of assumptions regarding project activities.

Question 88

Monte Carlo Analysis?

Answer 88

Is a simulation technique used by project managers to make predictions about the statistical distribution of activity durations or cost estimates for a project. It is a form of simulation, where the project model is run many times with input values (durations or costs) chosen
at random for each iteration from the duration or cost probability distributions. This analysis does not produce a single result, but calculates a range of possible results. In more general business terms, Monte Carlo refers to not one single analysis method but to a wide class of techniques, mostly making use of sophisticated computers and inputs of random numbers, probabilities, and algorithms. It has a wide range of applications in many fields, including finance and engineering; because it works effectively with large inputs of numbers, it is well suited for complex project management problems in which more than a few inputs such as costs, activity, and
duration are unknown.

Question 89

Expected Monetary Value (EMV) analysis?

Answer 89

Is a method of calculating the average outcome when
the future is uncertain. Opportunities will have positive values and threats will have negative values. EMV is found by multiplying the monetary value of a possible outcome by the probability it will occur. This is done for all possible outcomes and their figures are added together. The sum is the EMV for that scenario. This technique is used in decision tree analysis; EMV must be calculated in order for the analysis to find the best outcome. The best outcome is the lowest combination of cost and EMV.

Question 90

Negative Risk Strategies?

Answer 90

Specify how to deal with risk scenarios that have a possible negative impact on the project.

Question 91

What are the 4 negative risk strategies?

Answer 91

1. Risk avoidance
2. Risk transference
3. Risk mitigation
4. Risk acceptance

Question 92

Risk avoidance?

Answer 92

Involves changing the project plan to prevent a potentially detrimental risk condition or event from happening. One way to eliminate a risk is to reduce or change the scope of the project in an attempt to avoid high-risk activities. The scope change could involve the project requirements or
specifications, or it can mean changing the approach to meeting the requirements or specifications.

Question 93

Risk transference?

Answer 93

Involves shifting the impact of a risk event and ownership of the risk response to a third party. This strategy is used in connection with financial risk exposure and most often involves payment of a risk
premium to the party assuming the risk.

Question 94

Risk mitigation?

Answer 94

Attempts to reduce the probability or impact of a potential risk event to an acceptable level. Mitigation may involve implementing a new course of action in an effort to reduce the problem or changing the current conditions so that the probability of the risk occurring is reduced. Sometimes, when reducing the probability is not possible, the focus must be on reducing the consequences of the risk event.

Question 95

Risk acceptance?

Answer 95

Involves accepting that a risk exists. The acceptance may be passive or active. Active acceptance indicates that a plan is ready for execution if the risk occurs. Passive acceptance indicates that no action is planned if the
risk occurs and whatever action is suitable will be executed on an extempore basis.

Question 96

Positive Risk Strategies?

Answer 96

Address how to deal with risk scenarios that have a possible positive impact on the project.

Question 97

What are the 4 positive risk strategies?

Answer 97

1. Risk exploitation
2. Risk sharing
3. Risk enhancement
4. Risk acceptance

Question 98

Risk exploitation?

Answer 98

Often used when a project team wants to make sure that a positive risk is fully realized. This is often done by hiring the best experts in a field or ensuring that the most technologically advanced resources are available to the project team.

Question 99

Risk sharing?

Answer 99

Entails partnering with another party in an effort to give your team the best chance of seizing the opportunity. Joint ventures are a common example of risk sharing.

Question 100

Risk enhancement?

Answer 100

Attempts to increase the probability that an opportunity will occur. This is done by focusing on the trigger conditions of the opportunity and trying to optimize their chances for occurrence.

Question 101

Risk acceptance?

Answer 101

Involves accepting the risk and actively responding to it as it comes, but not through pursuit.

Question 102

Contingent Response Strategy?

Answer 102

Is a risk response strategy developed in advance, before things go wrong; it is meant to be used if and when identified risks become reality. An effective contingent
response strategy allows a project manager to react quickly and appropriately to the risk event, mitigating its negative impact or increasing its potential benefits. A contingent response strategy may include a fallback plan, which is implemented if the initial response strategy is ineffective in responding to the risk event. A contingent response strategy is also called a contingency plan.

Question 103

Contingency Reserves?

Answer 103

A contingency reserve is a predetermined amount of additional time, money, or resources set aside in advance to be used to further the project’s objectives in the event that unknown risks or accepted known risks become reality. Contingency reserves cover risk events that are not accounted for in the project’s schedule and cost baselines. The amount of reserve is determined by the potential impact of the risk, but should include enough to implement a contingency plan and a buffer for dealing with unidentified risks.

Question 104

Risk-Related Contract Decisions?

Answer 104

Are risk response approaches agreed upon by both parties when procuring materials from a third party. These decisions are made when:

• Planning risk responses for the project.
• Sharing or transferring part or all of the risk (opportunity or threat, respectively).
• Enhancing or mitigating part or all of the opportunity or threat, respectively, faced by an organization.

Some of the risk-related contract decisions include agreements for insurance, bonding, services, Letter of Credit (LoC), bank guarantee, and other items as appropriate for the project.