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RMC PMP Exam Prep > Chapter 11 - Risk Management > Flashcards

Chapter 11 - Risk Management Flashcards

1
Q

Risk Management explained

A

Risk management is the process of identifying, evaluating, and planning responses to events, both positive and negative, that might occur throughout the course of a project

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2
Q

When assessing risk, it’s necessary to determine the risk’s…

A
  • Probability (how likely)
  • Range of outcomes (impact)
  • Expected timing (when)
  • Frequency (how often)
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3
Q

Risk appetite (risk tolerance)

A

General, high-level description of the level of risk acceptable to an individual or an organization

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4
Q

Risk threshold

A

The specific point at which risk becomes unacceptable

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5
Q

What are the seven risk management processes?

A
  1. Plan risk management
  2. Identify risks
  3. Perform qualitative risk analysis
  4. Perform quantitative risk analysis
  5. Plan risk responses
  6. Implement risk responses
  7. Monitor risks
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6
Q

What does the risk management plan include?

A
  1. Risk strategy (overall approach to managing risks)
  2. Methodology (defines how risk management will be performed)
  3. Roles and responsibilities
  4. Funding
  5. Timing
  6. Risk categories
  7. Stakeholder risk appetite/thresholds
  8. Definitions of probability and impact
  9. Reporting
  10. Tracking
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7
Q

Where would you find a standard list of risk categories?

A

A Risk Breakdown Structure (RBS) is an organizational chart that can help identify and document risk categories

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8
Q

Two main types of risks

A
  • Business risk - risk of a gain OR a loss
  • Pure (insurable) risk - only a risk of loss, such as a fire, theft, etc.
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9
Q

More detailed categories of risks (outside of business and pure/insurable)

A
  • External
  • Internal
  • Technical
  • Commercial
  • Unforeseeable
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10
Q

Non-event risk categories

A

Variablity - risks caused by the inability to predict future changes

Ambiguity - risks caused by a lack of understanding

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11
Q

Who is involved in risk identification?

A

EVERYONE!

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12
Q

When does the major part of risk identification occur?

A
  • At the onset of the project (initiating and planning)
  • Keep in mind that risks may still be identified later in the project, and risks should be continually reassessed
  • More specifically, risks are identified during integrated change control, when working with contracts, when working with resources, and when dealing with project issues
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13
Q

What does the Identify Risks process result in?

A
  • Risk register
  • Risk report
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14
Q

If you are in the Identify Risks process, what does the risk register contain?

A
  • List of risks
  • Potential risk owners
  • Potential risk responses
  • Root cause of risks
  • Updated risk categories
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15
Q

When are risk responses documented?

A

Both in the Identify Risks process (as potential risk responses) AND during Plan Risk Responses process (as selected response plans)

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16
Q

Qualtitative Risk Analysis process

A
  • Analyzing risks’ potential impact and probability and creating a shortened list of the previously identified individual project risks
  • Also involves identifying which risks should move more quickly through the process than others (risk parameters)
  • This is a subjective analysis of identified risks
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17
Q

What must be determined in order to perform qualtitative risk analysis?

A

Probability of risk occuring using a standard scale

Impact of risk occuring, using a standard scale

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18
Q

What occurs after you perform qualitative risk analysis?

A

You either:

Further analyze the qualitatively analyzed risks

or

Move directly into the Plan Risk Responses process

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19
Q

What must you do before you can use the risk information collected on the project?

A

You must analyze the precision of the data by assessing its accuracy and reliability

Known as risk data quality assessment

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20
Q

Risk data quality assessment involves determined what for each risk?

A

Extend of the understanding of each risk

Data available about the risk

Quality of the data

Reliability and integrity of the data

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21
Q

Why is a probability and impact matrix used?

A

To sort or rate risks to determine which ones warrant an immediate response and which ones should be put on the watch list

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22
Q

Types of risk parameters

A

Urgency

Dormancy

Manageability and controllability

Strategic impact

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23
Q

Urgency risk parameter

A
  • Indicates if the risk is likely to occur soon or if the risk requires a particularly long time to plan a response
  • Urgent risks may be moved directly into risk response planning
  • Urgent risks may simply be the first ones for which you plan a response in risk response planning
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24
Q

Dormancy risk parameter

A

Refers to the anticipated time between when a risk occurs and when its impact is felt

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25
Q

Manageability and controllability parameter

A

Indicates the level of difficulty involved in dealing with an identified risk, should it occur

26
Q

What can the Qualitative Risk Analysis process be used for?

A

Compare the risks of the project to the overall risk of other projects

Determine whether the project should be continued or terminated

Determine whether to proceed to Quantitative analysis or Plan Risk Responses processes

27
Q

Quantitative Risk Analysis process

A
  • Numerically analyzing the probability and impact of risks that ranked highest in qualitative risk analysis
  • Objective process to determine numerical impact in real terms
28
Q

Purpose of Quantitative Risk Analysis

A
  • Determine which risk events warrant a response
  • Determine overall project risk
  • Determine quantified proabbility of meeting project objectives (i.e., X% chance to complete project within Y time frame)
  • Determine cost and schedule reserves
  • Identify risks requiring the most attention
  • Create realistic cost, schedule, and scope targets
29
Q

Should you always do a qualitative risk analysis? Quantitative risk analysis?

A
  • ALWAYS do qualitative
  • Quantitative is NOT required, and may be skipped in favor of moving to risk response planning. Only do it if it’s worth time and money!
30
Q

What actions are required in quantitative risk analysis?

A
  • Further investigate the highest rated risks on the project
  • Perform data analysis to determine which risks have the most impact
  • Determine how much quantified risk the project has through data analysis
31
Q

Which risks are likely to require quantitative assessment?

A

The risks with the highest probabilities and impacts

32
Q

Sensitivity analysis

A
  • Technique to analyze and compare the potential impacts of identified risks
  • Tornado diagram is a typical graphical representation of sensitivity analysis
33
Q

What is the best way to measure overall ranking of risks?

A

Utilizing expected value (EV) for schedule results and Expected Monetary Value (EMV) for costs

EV/EMV takes into account BOTH probability AND impact, instead of separating them

34
Q

EV/EMV formula

A

EV or EMV = P x I

P = Probability

I = Impact

35
Q

In Plan Risk Responses process, what are your options for dealing with top risks?

A
  • Eliminate threats
  • Make sure opportunities happen
  • Decrease the probability of threats
  • Increase probability of opportunities
36
Q

Power of Risk Response Planning

A

Eliminating threats while still in the Planning process

37
Q

What is the best answer to a question describing a major problem on the project?

A

Implement the respective contingency plan!

Do NOT choose the answer that provides a solution to the problem once it’s occurred

38
Q

Can you eliminate all threats and exploit all opps on a project?

A

No, simply because eliminating all threats and exploiting all opportunities would cost too much time and money

39
Q

Response strategies for threats

A
  • Avoid (remove work or expand scope to avoid risk)
  • Mitigate (reduce probability of risk event)
  • Transfer (3rd party responsibility)
40
Q

Response strategies for opportunities

A
  • Exploit (add/change work)
  • Enhance (increase probability)
  • Share (3rd party resonsibility)
41
Q

Response strategies for BOTH threats and opportunities

A
  • Escalate
  • Accept
42
Q

Response strategy for high-priority, high-impact risks? Low-priority, low-impact?

A

High-Priority, High-Impact

Avoid

Mitigate

Low-Priority, Low-Impact

Transfer

Escalate

Accept

43
Q

What is a response to pure risks?

A

Purchase insurance

Purchasing the insurance (transferring risk ownership) does NOT eliminate all impacts

44
Q

When should threats/opps be escalated? What happens once they’re escalated?

A
  • Threats/opps should be escalated if they are outside the scope of the project or beyond PM’s authority
  • These risks MUST be accepted by the program/portfolio manager, at which point it’s documented and the risk is no longer monitored at the project level
45
Q

Passive acceptance

A

Do nothing with the risk

This leaves actions to be determined as need (workarounds) if the risk occurs

46
Q

Active acceptance

A

Creating contingency plans to be implemented if the risk occurs and allocating time and costs reserves to the project

47
Q

Who should risk response strategies be communicated to?

A

Sponsor

Management

Stakeholders

48
Q

Techniques to evaluate and rank potential risk responses

A
  1. Cost-benefit analysis
  2. Multicriteria decision analysis
49
Q

Residual risks

A
  • RIsks that remain after risk response planning
  • Added to risk register after Risk Response Planning process
50
Q

Who can be a risk owner?

A

Team member

Any stakeholder other than a team member

51
Q

Secondary risks

A

New risks created by the implementation of selected risk responses

(A response to one risk will create the possibility of new risks)

52
Q

In terms of risks, what needs to happen before a contract is finalized?

A

PM should have completed a risk analysis and included contract terms and conditions required to mitigate threats and enhance opps

53
Q

How to calculate contingency reserves

A

Subtract total EMV for opportunities from the total EMV of threats

Contingency Reserve Total = Threat EMV - Opps EMV

54
Q

When calculating contingency reserves, why do you subtract EMV of opps?

A

Opps save money and time if they occur, effectively reducing the cost or schedule baselines

Threats increase the amount of contingency reserves, while opps decrease contingency reserves

55
Q

What do you do with noncritical risks?

A

Document them in a watch list, revisit them periodically

56
Q

What is the most important item to address in meetings?

A

Risk!

57
Q

Workaround

A

Unplanned responses developed to deal with the occurrence of unanticipated events or problems

58
Q

Techincal performance analysis

A

Analysis that uses project data to compare planned versus actual completion of technical requirements to determine if there is any variance from what was planned

59
Q

Purpose of status meetings

A

Time to collectively perform risk reviews and risk audits

NOT to go around the room and ask for everyone’s status updates

60
Q

Risk review

A

Discussion of the effectiveness of planned risk responses that have been implemented on the project, and may result in new risks, secondary risks, and risks that are no longer applicable

61
Q

Risk audit

A

Performed during meetings to assess the overall process of risk management

RMC PMP Exam Prep (14 decks)

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