Risk Flashcards
If a project has a 60 percent chance of a $100,000 profit and a 40 percent chance of a $100,000 loss, the expected monetary value of the project is:
$20,000 profit $60,000 loss $100,000 profit $40,000 loss
$20,000 profit
EMV = probability * impact. 0.6 * $100,000 = $60,000. 0.4 * ($100,000) = ($40,000). $60,000 - $40,000 = $20,000 profit.
Which of these is an input to the Monitor Risks process?
Work performance information Change requests Work Performance Reports Risk audits
Work performance reports are inputs to the monitor risks process.
Melissa is managing a hardware deployment project and is creating a risk management plan. Which of the following would not be included in this plan?
Methodology Budgeting Roles and responsibilities Templates
Templates
Templates is not a valid response. The other choices are typical components of a risk management plan.
Which of these is not a data analysis technique used during quantitative risk analysis?
RACI chart Tornado diagram Influence diagrams Decision tree
RACI chart
RACI chart is not a data analysis technique used during quantitative risk analysis. Rest of the choices are valid techniques for data analysis.
Mary is managing an organizational transformation project. The nature of the project would require responding to high levels of change and would also require continuous stakeholder engagement. Which of the project lifecycles should be chosen for this project?
Waterfall life cycle Plan-driven life cycle Predictive life cycle Adaptive life cycle
Adaptive life cycle
Projects with adaptive life cycles are intended to respond to high levels of change and require ongoing stakeholder engagement. All other choices are predictive life cycles which are designed to be plan driven rather than being change driven.
Which of the following is true about risks?
Risks always have negative impact and not positive. Risk impact should be considered, but probability of occurrence is not important. The risk register documents all the identified risks in detail. Risk Response Plan is another name for Risk Management Plan.
The risk register documents all the identified risks in detail.
The risk register contains details of the identified risks.
A decision tree is a Perform Quantitative Risk Analysis technique. A decision tree is represented by a Decision Tree Diagram. The decision tree describes a situation under consideration, the implications of each of the available choices, and the possible scenarios. A Decision Tree Diagram shows how to make a decision among alternative capital strategies known as:
Alternative nodes Question points Decision nodes Checkpoints
Decision nodes
The decision points are known as decision nodes. The decision tree incorporates the cost of each available choice, the possibilities of each of the available choices, and possible scenarios. It shows how to make a decision among alternative capital strategies (decision nodes) when the environment is not known with certainty.
A project manager is currently in the process of prioritizing individual project risks by assessing their detectability, proximity, and impact value. The project manager would like to create a graphical representation of these three dimensions. What is the best course of action?
Develop a bubble chart Create a probability and impact matrix Prepare a requirements traceability matrix Generate a RACI chart
Perform Qualitative Risk Analysis is the process of prioritizing individual project risks for further analysis or action by assessing their probability of occurrence and impact as well as other characteristics such as detectability, proximity, and impact value. Thus, the project manager is conducting the Perform Qualitative Risk Analysis process and needs to create a graphical representation of project risks along three dimensions. A data representation technique that may be used in support of this process includes hierarchical charts, of which bubble charts are an example. A bubble chart displays three dimensions of data, where each risk is plotted as a disk (bubble), and the three parameters are presented by the X-axis value, the Y-axis value, and the bubble size. In this scenario, the detectability and proximity can be plotted on the X and Y axes, and the impact value represented by the bubble size. The incorrect answer choices describe charts that can only display two parameters rather than three.
You are establishing the relative priorities of individual project risks that have been identified earlier in the project. Which of the following tasks are you least likely to perform?
Review the assumption log Research the stakeholder register Create the risk report Examine the risk register
Create the risk report
Perform Qualitative Risk Analysis is the process of prioritizing individual project risks for further analysis or action by assessing their probability of occurrence and impact as well as other characteristics. Thus, the question suggests that the Perform Qualitative Risk Analysis process is being performed in this scenario. The assumption log, risk register, and stakeholder register are all project documents which may serve as inputs into the Perform Qualitative Risk Analysis process. Note, the question is asking for the ‘least’ likely activity to be performed in support of this process. The risk report is a project document that provides information on sources of overall project risk as well as the summary information on individual project risks and is created as part of the Identify Risks process, not the Perform Qualitative Risk Analysis process, making the risk report the best answer to the question asked.
A small project with a limited budget is trying to curtail costs. Which of the following processes may be eliminated in such a project?
Plan Risk Management Perform Qualitative Risk Analysis Perform Quantitative Risk Analysis Identify Risks
Perform Quantitative Risk Analysis
Availability of budget and time is a key factor that determines the need for the perform quantitative risk analysis process. A small project with a limited budget may decide to do away with this process if the project management team decides that quantitative statements about risk and impacts are not needed.
You are the project manager of a project and are about to conduct a risk identification exercise in a few days’ time. You want to remind the participants in the exercise beforehand of the various sources from which risk may arise in the project. What could you use to help you do this?
A Risk Simulation Structure (RSS) A Risk Register An Impact Matrix A Risk Breakdown Structure (RBS)
The risk breakdown structure (rbs) is a hierarchically organized depiction of identified project risks arranged by risk category and subcategory. This may be based on a previously prepared categorization framework. The rbs serves to remind participants in the risk identification exercise of the different sources from which project risk may arise.
Early in the project, you are meeting with your team and would like to address all the strengths, weaknesses, opportunities, and threats the project is facing. What tool should be used?
SWOT Analysis Interviewing Delphi Technique Brainstorming
SWOT Analysis
A swot analysis chart would be the best choice. Swot is an acronym for strengths, weakness, opportunities and threats.
Your project team has recently identified a risk in the software development project and decided not to change the project management plan to deal with the risk. The risk response strategy that your team used in this scenario is an example of:
Transfer Avoid Mitigate Acceptance
When risks cannot be handled or managed in a project, it is advisable to accept them. In this scenario, your team is unable to devise a suitable response strategy. Hence, risk acceptance is the correct strategy to employ.
During a recession, a project manager posts a positive risk that in the current economic environment, cheaper resources may become available. On the way into work, the project manager hears about a competitor going out of business and contacts the competitor to acquire some equipment, materials, and supplies at a fraction of their normal value. What is the project manager doing?
Sharing a realized positive risk Transferring an identified risk Executing a mitigation plan Reacting to a contingency plan trigger
Some risk responses are designed for use only if certain events occur. For some risks, it is appropriate for the project team to make a response plan that will only be executed under certain predefined conditions. Risk responses identified using this technique are often called contingency plans or fallback plans and include identified triggering events that set the plans in effect. The question describes a positive risk (opportunity) that was identified and captured in the risk register along with the risk trigger and responses. Part of the responsibility of the project manager and the risk owner is to understand what events may cause (or trigger) a risk to occur. In this case, the project manager heard of a competitor going out of business which triggered the action of contacting the competitor to acquire resources much cheaper than they otherwise could have been purchased. Note that the project manager also exploited an opportunity in this situation. However, exploiting the realized risk was not offered as an answer choice. Therefore, of the available options, reacting to a contingency plan trigger is the best response.
Perform Qualitative Risk Analysis is a quick way to prioritize how a project team will respond to risks. It is based on risk _________________ and _________________.
Probability, impact Probability, focus Probability, exposure Exposure, cost
Probability, impact
Perform qualitative risk analysis is usually a rapid and costeffective means of establishing priorities for the plan risk responses process.
Which of these is accurate regarding risk management?
It is a passive activity in project management. Organizations are not likely to perceive risk as a threat to project success. The attitudes of individuals and organizations must not be a factor affecting risk management. It has its origins in the uncertainty present in all projects.
Risk management does indeed have its origins in the uncertainty present in all projects.
With a parking garage construction project underway, you are currently creating the risk management plan. In support of this process, you need to determine the acceptable level of overall project risk exposure. What should you do first?
Consult the risk exposure register within the organizational process assets
Develop a set of responses to individual project risks to mitigate overall project risk
Determine the risk appetites of key project stakeholders
Facilitate a brainstorming meeting to develop a comprehensive list of project risks
The risk management plan is created as an output of the Plan Risk Management process. Stakeholder risk appetite is one of the elements which may be included in the risk management plan. The risk appetites of key stakeholders on the project are recorded in the risk management plan. In particular, stakeholder risk appetite should be expressed as measurable risk thresholds around each project objective. These thresholds will determine the acceptable level of overall project risk exposure. The incorrect answer choices represent activities which would not likely be conducted as part of the development of the risk management plan. Therefore, of the available options, determining the risk appetites of key stakeholders is the best answer to the question asked.
Negative risks can either be ______, transferred, or mitigated as a countermeasure.
ignored avoided exploited enhanced
avoided
You can avoid a risk by revising the project plan to eliminate the risk entirely.
Which of the following is NOT a valid WBS creation approach:
Parametric approach
Use of WBS templates
Top-down approach
Use of organizational guidelines
Parametric approach
A WBS structure may be created through various approaches. Some of the popular methods include the top-down approach, the use of organization-specific guidelines, and the use of wbs templates. Parametric approach is an estimation technique and not a valid wbs creation technique.
Which of the following is true about risks?
A risk usually has a single cause and, if it occurs, usually has a single effect. A risk usually has more than one cause, and if it occurs, usually has a single effect. A risk may have one or more causes, and, if it occurs, may have one or more effects. A risk usually has a single cause and, if it occurs, may have one or more effects.
A risk may have one or more causes, and, if it occurs, may have one or more effects.
A project risk is an uncertain event or condition whose occurrence may affect the objectives of the project. A risk may have one or many causes, and if it occurs, it may have one or more impacts.
Decision tree analysis is used to calculate the average outcome when the future includes scenarios that may or may not happen. What are a decision node’s inputs and outputs?
Input: Cost of each decision; Output: Probability of occurrence
Input: Scenario probability; Output: Expected Monetary Value (EMV)
Input: Cost of each decision; Output: Decision made
Input: Cost of each decision; Output: Payoff
Input: Cost of each decision; Output: Decision made
Decision tree analysis is used to calculate the average outcome when the future includes scenarios that may or may not happen. In a decision node, the input is the cost of each decision and the output is a decision made.
Joe is attempting to calculate the probable financial impact of some future uncertain scenarios. What method could he use?
Pareto analysis Variance analysis Expected monetary value analysis Earned value analysis
Expected Monetary Value (EMV) analysis is a statistical concept that calculates the average outcome when the future includes scenarios that may or may not happen. The EMV of opportunities will usually be positive values while risks will result in negative values.
You have been managing a research project to create genetically modified fruits using genetic engineering techniques. Since many legal issues are involved in this process, you created contingency allowances by using various quantitative analysis methods to account for cost uncertainty. You have just concluded a brainstorming session with your team in the execution phase to monitor risks that have developed in the project over the past few weeks and to establish new risk response plans. What should you do if you want to allocate more contingency reserves to account for new risks?
Perform the reserve analysis to compare the amount of contingency reserves remaining to the amount of risk remaining Perform Monte Carlo analysis to compare the amount of contingency reserves remaining to the amount of risk remaining Perform the quantitative risk analysis to determine the outstanding risks Perform the variance and trend analysis to compare planned results to the actual results
Perform the reserve analysis to compare the amount of contingency reserves remaining to the amount of risk remaining
Many risks may develop over the course of any project. Project managers must monitor those risks and plan risk responses. The reserve analysis is used as a tool in the monitor risks process. This technique is used to compare the amount of contingency reserves remaining to the amount of risk remaining throughout the execution of the project. Hence, you must conduct a reserve analysis first to decide on the contingency allowances.
Which of the following processes produces a Risk Register?
Perform Qualitative Risk Analysis
Identify Risks
Plan Risk Management
Perform Quantitative Risk Analysis
Identify Risks
The risk register is an output of the identify risks process.
During the Plan Risk Management process, assigning ___________ will help you and the project team identify all important risks and work more effectively during the identification process.
Blame Risk factors Risk mitigation plans Risk categories
Risk categories
Risk categories provide a structure that ensures a comprehensive process of systematically identifying risks and that contributes to the effectiveness and quality of the process.
At the beginning of the project, a project manager realized the technical expertise of the team was limited, a risk to the project. Midway through the project, the project manager decided that this was no longer a risk and considered it outdated. As part of which process would he do the risk reassessment?
Perform Qualitative Risk Analysis Perform Quantitative Risk Analysis Perform Risk Assessment Monitor Risks
Risk reassessment is performed as part of the monitor risks process. Such project risk reassessments should be regularly scheduled and may result in the closure of outdated risks.
There are a number of risks that have been identified in your project. The team has decided not to change the project plan to deal with the risks, but they have established a contingency reserve of money in the event something triggers these risks. This is an example of what type of risk mitigation technique?
Passive acceptance Avoidance Contingent Response Strategy Active acceptance
Active acceptance
Recognizing the risk and not changing the plan but making some contingencies in the event the risk is triggered is an example of active acceptance. Passive acceptance would recognize the risk but not put contingencies in place, and avoidance would be correct if the project plan were modified.
Which of the following is not a valid instance of risk transference?
Fixed Price contracts Use of a Cost Reimbursable contract Performance bonds Warranties
A cost-reimbursable contract does not transfer risk to the seller; rather, the risk is with the buyer. Risk transference involves shifting the negative impact of a risk, along with the ownership of the response, to a third party. Risk transference nearly always involves payment of a premium to the party taking on the risk. Examples include performance bonds, warranties, and fixed price contracts.
You are in the middle of a risk assessment meeting with key stakeholders, customers and project team leaders. While identifying and assessing risks, you realize that two key stakeholders are overemphasizing the impact of a risk. What is the best step to take to avoid unfairness or bias when assessing risks?
Implement assumptions analysis to explore the validity of assumptions Perform sensitivity analysis to establish which risks have the most impact on the project Develop a risk response strategy to eliminate threats Engage a neutral facilitator to support the Perform Qualitative Risk Analysis process.
Engage a neutral facilitator to support the Perform Qualitative Risk Analysis process.
Engaging a neutral facilitator to support the perform qualitative risk analysis process should help address bias.
Three strategies that typically deal with negative risks or threats are:
Transfer, Exploit, and Accept
Avoid, Transfer, and Mitigate
Avoid, Transfer, and Exploit
Enhance, Share, and Accept
Avoid, Transfer, and Mitigate
Five negative risk management strategies are: escalate, avoid, transfer, mitigate, and accept.
You are the project manager for a project and have just entered the third year of a scheduled four-year project. You need to evaluate new risks that have arisen since the project began. What agenda item do you need to add to your next team meeting?
Risk re-assessment
Process Improvement Plan
Risk audit
Variance and trend analysis
Risk re-assessment
A risk reassessment is a technique that involves reevaluating project risks and identifying new risks that arise as the project moves forward. These risks are evaluated and placed in the risk register. The pmbok recommends conducting risk reassessments during team meetings as a part of the monitor risks process.
A number of identified risks occurred early in a project. As a result, most of the project objectives ended up in jeopardy. The project manager decided to present a case to management that the project be closed down. This is an example of:
Risk Transfer Risk Avoidance Risk Acceptance Risk Mitigation
Risk avoidance involves changing the project management plan to eliminate the risk. Although an extreme situation, shutting down a project constitutes a radical but legitimate avoidance strategy.
As part of project planning, you and your project team are developing a comprehensive list of individual project risks and sources of overall project risk. You want to analyze the validity of assumptions and constraints to determine which pose a risk to the project. Which technique will be the most helpful for you?
Data analysis Perform Qualitative Risk Analysis Cost-benefit analysis Perform Quantitative Risk Analysis
The question implies that the project team is performing the Identify Risks process. Assumption and constraint analysis is one of the data analysis techniques used during the Identify Risks process. Assumption and constraint analysis explores the validity of assumptions and constraints to determine which pose a risk to the project. This is the data analysis technique being used by the project team.
An organization wishes to ensure that the opportunity arising from a risk with positive impact is realized. This organization should:
Exploit the risk Mitigate the risk Accept the risk Avoid the risk
Exploit the risk
Five strategies to deal with risks with potentially positive impacts on project objectives are to escalate, exploit, share, enhance, or accept the risk. An exploit strategy ensures that the opportunity is realized.
The X in the DfX can be:
Design assumptions Different aspects of product development Discretionary dependencies Competing project constraints
The X in the DfX can be different aspect of product development, such as reliability, deployment, assembly, manufacturing, cost, service, usability, safety, and quality.
Which term best describes the Identify Risks process?
Finite Iterative Inconsequential Redundant
Iterative
The identify risks process is an ongoing, iterative process as risks are often identified throughout the project’s life cycle.
