Risk Management Flashcards
PMP PREP
Q- What is the difference between PERT and CPM?
PERT includes uncertainty and risk in the schedule by using probabilistic estimation while CPM uses deterministic estimation which assumes that each activity will take exactly the estimated time. Therefore, PERT is more appropriate for projects with a high degree of uncertainty and risk.
A project manager is dealing with multiple risks in their construction project. They have assigned probabilities and impacts to each risk. What technique should the manager use to prioritize the risks for further quantitative risk analysis?
a.Implementing a contingency plan
b.Performing variance analysis
c.Creating a risk data quality assessment
d.Performing a sensitivity analysis
A sensitivity analysis is a technique used to identify the impact of individual variables on the overall outcome of a project. In the context of risk management, it helps prioritize risks for further quantitative analysis by assessing how changes in each risk variable (probability or impact) affect the project’s objectives. This analysis can guide the project manager in focusing on high-impact or high-probability risks that require more detailed quantitative assessment.
You are a project manager in an energy company with a high-risk appetite exploring new sources of renewable energy. A team member suggests investing a significant portion of the budget into researching an unproven technology that could potentially change the industry but might end up being unviable. Based on the risk appetite, how should you proceed?
a.Divert all resources to the new technology without any risk analysis.
b.Allocate resources for in-depth risk analysis and if the risk falls within the company’s risk acceptance threshold, proceed with the research.
c.Reject the idea immediately due to its unproven status.
d.Immediately accept the idea without considering other ongoing projects.
A company with a high risk appetite is willing to accept greater risks in pursuit of greater rewards.However, this does not mean risks should be accepted blindly. Risks still need to be assessed and must fall within the company’s established risk acceptance parameters.
A project manager is assigned to a project with a tight budget but a high risk appetite. A team member identifies a risk with potential cost-saving opportunities but also potential budget overruns. Based on the risk appetite, what should the project manager do?
a.Transfer the risk to a third party
b.Immediately reject the opportunity due to budget constraints
c.Accept the risk and look for ways to maximize the rewards
d.Only focus on the cost-saving aspects
**Considering the high risk appetite and potential for cost savings, the project manager should accept the risk and look for ways to maximize the rewards. **
This approach reflects the high risk appetite and focuses on the possible benefits for the project.
Q- During a project update meeting, a key stakeholder suggests implementing a new technology to save time and money. The technology is untested and could introduce new risks. If the stakeholders have a medium risk appetite, what should the project manager do?
a.Reject the suggestion without consideration
b.Seek approval from other stakeholders before implementing
c.Evaluate the technology’s risks and benefits before making a decision
d.Immediately implement the technology
With a medium risk appetite, the project manager should evaluate the risks and benefits of —— before making a decision. This approach allows the project manager to understand the potential impacts on the project and make an informed choice.
A pharmaceutical company is working on a new product with strict regulations. The stakeholders have low risk appetite due to the potential financial and legal consequences. As a project manager, how should you respond to an identified risk?
a.Implement high-impact/high-reward strategies
b.Transfer risks to third parties
c.Focus on risk mitigation and avoidance
d.Accept the risk and proceed
With a low risk appetite, the project manager should focus on risk mitigation and avoidance strategies to reduce the likelihood and impact of risks. This approach will better align with the stakeholders’ preferences and ensure compliance with strict regulations.
What is Risk Culture
It is a set of attitudes and behaviors that individuals and groups have towards risks that may affect project objectives. It includes :
- People’s ability to recognize and react to risks,
- their Willingness to accept responsibility for risks’ outcomes,
- and their Approach to risk taking and decision-making.
How to buid a positive risk culture
A positive risk culture is built on open communications, education, and mutual understanding in risk management.
The project manager plays a critical role in fostering this culture by promoting transparency, providing proper risk management education, and setting a good example.
