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38 Cards in this Set
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All of the following are factors in the assessment of project risk EXCEPT: A. Risk events. B. Risk probability. C. Amount at stake. D. Insurance premiums. |
Answer D Explanation Insurance premiums are not factors in assessing project risk. They come into play when you determine which risk response strategy you will use. |
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If a project has a 60 percent chance of a US $100,000 profit and a 40 percent chance of a US$100,000 loss, the expected monetary value (EMV) for the project is: A. $100,000 profit. B. $60,000 loss. C. $20,000 profit. D. $40,000 loss. |
Answer C Explanation Expected monetary value is calculated by EMV probability x impact. We need tocalculate both positive and negative values and then add them:0.6 x $100,000 = $60,0000.4 x ($100,000) = ($40,000)Expected monetary value $60,000 - $40,000 = $20,000 profit |
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Assuming that the ends of a range of estimates are +/- 3 sigma from the mean, which of thefollowing range estimates involves the LEAST risk? A. 30 days, plus or minus 5 days B. 22 to 30 days C. Optimistic = 26 days, most likely = 30 days, pessimistic = 33 days D. Mean of 28 days |
Answer C Explanation This one drove you crazy, didn't it? Reread the question! A mean of 28 days is nota range estimate, and so must be eliminated as a possible answer. When you look at the ranges ofeach of the other choices, you will see that 30 days, plus or minus 5 days = a range of 10 days. Therange of 22 to 30 days = a range of 8 days. An optimistic estimate of 26 days, most likely estimateof 30 days, and pessimistic estimate of 33 days represents a range of 7 days. The estimate with thesmallest range is the least risky, and therefore the correct choice. Did you realize the words+/- 3sigma are extraneous? Practice reading questions that are wordy and have extraneous data. |
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Which of the following risk events is MOST likely to interfere with attaining a project's scheduleobjective? A. Delays in obtaining required approvals B. Substantial increases in the cost of purchased materials C. Contract disputes that generate claims for increased payments D. Slippage of the planned post-implementation review meeting |
Answer A Explanation Cost increases and contract disputes for payments will not necessarily interfere withschedule. If a "post-implementation'' review meeting slips, it may not interfere with the projectschedule. Delays in obtaining required approvals is the only choice that always causes a time delay,and is therefore the most likely to threaten the project schedule. |
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If a risk has a 20 percent chance of happening in a given month, and the project is expected to last fivemonths, what is the probability that this risk event will occur during the fourth month of the project? A. Less than 1 percent B. 20 percent C. 60 percent D. 80 percent |
Answer B Explanation No calculation is needed. If there is a 20 percent chance in any one month, thechance in the fourth month must therefore be 20 percent. |
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If a risk event has a 90 percent chance of occurring, and the consequences will be US $10,000, what does US $9,000 represent? A. Risk value B. Represent value C. Expected monetary value D. Contingency budget |
Answer C Explanation Expected monetary value is calculated by multiplying the probability times theimpact. In this case, EMV = 0.9 x $10,000 $9,000. |
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Most of the risks will be identified during which risk mana~:ement processes? A. Perform Quantitative Risk Analysis and Identify Risks B. Identify Risks and Control Risks C. Perform Qualitative Risk Analysis and Control Risks D. Identify Risks and Perform Qualitative Risk Analysis |
Answer B Explanation This is a tricky question. Although risks can be identified at any time throughoutthe project, most risks are identified during the Identify Risks process. Newly emerging risks areidentified in the Control Risks process. |
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What should be done with risks on the watch list? A. Document them for historical use on other projects. B. Document them and revisit during project monitoring and controlling. C. Document them and set them aside because they are already covered in your contingency plans. D. Document them and give them to the customer. |
Answer B Explanation Risk change throughout the project. You need to review risk at intervals during the project to ensure noncritical risk on the watch list have not become critical. |
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All of the following are ALWAYS inputs to the risk management process EXCEPT: A. Historical information. B. Lessons learned. C. Work breakdown structure. D. Project status reports. |
Answer D Explanation Project status reports can be an input to risk management. However, when completing risk management for the first time, you would not have project status reports. Therefore, project status reports are not always an input to risk management. |
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Risk tolerances are determined in order to help:
A. The team rank the project risks. B. The project manager estimate the project. C. The team schedule the project. D. Management know how other managers will act on the project. |
Answer A Explanation If you know the tolerances of the stakeholders, you can determine how they mightreact to different situations and risk events. You use this information to help assign levels of riskon each work package or activity. |
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All of the following are common results of risk management EXCEPT:
A. Contract terms and conditions are created. B. The project management plan is changed. C. The communications management plan is changed. D. The project charter is changed. |
Answer D Explanation A contract is a tool to transfer risks. The project management plan could change toinclude a modified WBS and new work packages related to mitigating risk. The communicationsmanagement plan could change as a way to address a risk. A change to the charter is afundamental change to the project and may require a major adjustment to all aspects of theproject management plan. It is not a common result of risk management efforts. |
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Purchasing insurance is BEST considered an example of risk:
A. Mitigation. B. Transfer. C. Acceptance. D. Avoidance. |
Answer B Explanation To mitigate risk, we either reduce the probability of the event happening or reduce itsimpact. Acceptance of risk means doing nothing (if it happens, it happens, or contingency plans arecreated). Avoidance of risk means we change the way we will execute the project so the risk is no longera factor. Transference is passing the risk off to another party. Many people think of using insurance as away of decreasing impact. However, purchasing insurance transfers the risk to another party. |
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You are finding it difficult to evaluate the exact cost impact of risks. You should evaluate on a(n): A. Quantitative basis. B. Numerical basis. C. Qualitative basis. D. Econometric basis. |
Answer C Explanation If you cannot determine an exact cost impact of the event, use qualitative estimatessuch as Low, Medium, High, etc. |
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Outputs of the Plan Risk Responses process include: A. Residual risk, fallback plans, and contingency reserves. B. Risk triggers, contracts, and risk list. C. Secondary risks, process update, and risk owners. D. Contingency plans, project management plan updates, and sensitivity analysis. |
Answer A Explanation A risk list, process updates, and sensitivity analysis are not outputs of the Plan RiskResponses process. Residual risks, fallback plans, and contingency reserves are all outputs of thePlan Risk Responses process, making this the correct answer. |
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Workarounds are determined during which risk management process? A. Identify Risks B. Perform Quantitative Risk Analysis C. Plan Risk Responses D. Control Risks |
Answer D Explanation A workaround refers to determining how to handle a risk that has occurred but was notincluded in the risk register. The project must be in the Control Risks process if risks have occurred. |
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During which risk management process is a determination to transfer a risk made?
A. Identify Risks B. Perform Quantitative Risk Analysis C. Plan Risk Responses D. Control Risks |
Answer C Explanation Transference is a risk response strategy. Risk response strategies are determined inthe Plan Risk Responses process. |
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A project manager has just finished the risk response plan for a US $387,000 engineering project.Which of the following should he probably do NEXT?
A. Determine the overall risk rating of the project. B. Begin to analyze the risks that show up in the project drawings. C. Add work packages to the project work breakdown structure. D. Hold a project risk reassessment. |
Answer C Explanation This situation is occurring during project planning. Planning must be completedbefore moving on. Determining the risk rating of the project is done during Perform QualitativeRisk Analysis, and should have already been done. Project risk reassessment occurs duringControl Risk, the next step in the risk management process after Plan Risk Responses. But the question does not ask what is next in the risk management process, just what is next. Adding work package to be the WBS, as part of iterations, comes next in project planing. |
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A project manager analyzed the quality of risk data and asked various stakeholders to determinethe probability and impact of a number of risks. He is about to move to the next process of riskmanagement. Based on this information, what has the project manager forgotten to do?
A. Evaluate trends in risk analysis. B. Identify triggers. C. Provide a standardized risk rating matrix. D. Create a fallback plan. |
Answer C Explanation The project manager is in the Perform Qualitative Risk Analysis process. This process includes risk data quality assessment and probability and impact matrix development. It appears the project manager has not yet completed the matrix, which is used to sot risks base on their probability and impact rating. Trend analysis, the identification of triggers, and development of fallback plans will occur later in the risk management. |
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A project manager has assembled the project team. They have identified 56 risks on the project,determined what would trigger the risks, rated them on a risk rating matrix, tested theirassumptions, and assessed the quality of the data used. The team is continuing to move through the risk management process. What has the project manager forgotten to do?
A. Simulation B. Risk mitigation C. Over all risk ranking for the project D. Involved other stakeholder |
Answer D Explanation The process the project manager has used so far is fine, except the input of otherstakeholders is needed in order to identify more risks. |
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You are a project manager for the construction of a major new manufacturing plant that has neverbeen done before. The project cost is estimated at US $30,000,000 and will make use of threesellers. Once begun, the project cannot be cancelled, as there will be a large expenditure on plant and equipment. As the project manager, it is MOST important to carefully: A. Review all cost proposals from the sellers. B. Examine the budget reserves. C. Complete the project charter. D. Perform an identification of risks. |
Answer D Explanation A review of cost proposals could be done, but it is not a pressing issue based on thesituation provided. Examining the budget reserves could also be done, but not until risk planningis completed. It is always important to carefully complete a project charter, but there are otherissues needing detailed attention in this situation. Since this project has never been done before,and there will be a large cost outlay, it would be best for the project manager to spend more timeon risk management. Risk identification is the most proactive response and will have the greatestpositive impact on the project. |
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Your team has come up with 434 risks and 16 major causes of those risks. The project is the last in aseries of projects that the team has worked on together. The sponsor is very supportive, and a lot oftime was invested in making sure the project work was complete and signed off by all key stakeholders.During project planning, the team cannot come up with an effective way to mitigate or insure againsta risk. It is not work that can be outsourced, nor can it be deleted. What would be the BEST solution? A. Accept the risk. B. Continue to investigate ways to mitigate the risk. C. Look for ways to avoid the risk. D. Look for ways to transfer the risk. |
Answer A Explanation This question relates real-world situations to risk types. Did you realize that the entirefirst paragraph is extraneous? Based on the question, you cannot remove the work to avoid it, norcan you insure or outsource it to transfer the risk. This leaves acceptance as the only correct choice. |
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A project manager is quantifying risk for her project. Several of her experts are off-site, but wish tobe included. How can this be done? A. Use Monte Carlo analysis using the Internet as a tool. B. Apply the critical path method. C. Determine options for recommended corrective action. D. Use the Delphi technique. |
Answer D Explanation The Delphi technique is commonly used to obtain expert opinions on technicalissues, the necessary project or product scope, or the risks. |
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An experienced project manager has just begun working for a large information technologyintegrator. Her manager provides her with a draft project charter and immediately asks her toprovide an analysis of the risks on the project. Which of the following would BEST help in this effort? A. An article from PM Network magazine B. Her project scope statement from the project planning process C. Her resource plan from the project planning process D. A conversation with a team member from a similar project that failed in the past |
Answer DExplanation Did you realize this situation is taking place during project initiating? The scopestatement and resource plan are created in project planning, and so are not yet available. Therefore,we are left with deciding if the magazine article or a conversation with a team member whoworked on a similar project provides the greater value. Since the information gained in conversingwith the team member provides input more specific to your organization, it is the best choice. |
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You have been appointed as the manager of a new, large, and complex project. Because this projectis business-critical and very visible, senior management has told you to analyze the project's risks and prepare response strategies for them as soon as possible. The organization has risk management procedure that are seldom use or followed, and has had a history of handling risk badly. The project's first milestone is in two weeks. In preparing the risk response plan, input from which of the following is generally LEAST important? A. Project team members. B. Project sponsors. C. Individuals responsible for risk management policies and templates. D. Key stakeholders. |
Answer B Explanation Team members will have knowledge of the project and the product of the projectand will thus have a lot to contribute to risk responses. Those responsible for risk templates willbe able to provide the templates from past projects (historical records) and therefore will be veryimportant. Key stakeholders will know more about the technical working of the project to helpplan "What are we going to do about it?" so they are not likely to be the least important. Thesponsor may have the least knowledge of what will work to solve the problems. Sponsors needto be involved in the project and help identify risks. They may even approve the response planscreated by others, but they would not generally be major contributors to response plans. |
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You were in the middle of a two-year project to deploy new technology to field offices across thecountry. A hurricane caused power outages just when the upgrade was near completion. Whenthe power was restored, all of the project reports and historical data were lost with no wayretrieving them. What should have been done to prevent this problem?
A. Purchase insurance. B. Plan for a reserve fund. C. Monitor the weather and have a contingency plan. D. Schedule the installation outside of the hurricane season. |
Answer C Explanation The risk is the loss of data due to a power outage. Purchasing insurance is notrelated to preventing the problem. It transfers the risk. Creating a reserve fund is acceptance ofthe risk, and would help address the cost factors after the power failure but would not reduce the probability of impact of it. Avoiding the hurricane by scheduling the installation at different time reduce the power outage risk, but could have a large negative impact on the project schedule and so is not the best choice. The better choice of the option is to monitor the weather and know when to implement the contingency plan. |
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A system development project is nearing project dosing when a previously unidentified risk isdiscovered. This could potentially affect the project's overall ability to deliver. What should bedone NEXT?
A. Alert the project sponsor of potential impacts to cost, scope, or schedule. B. Qualify the risk. C. Mitigate this risk by developing a risk response plan. D. Develop a workaround. |
Answer B Explanation A workaround is an unplanned response to an event that is occurring. This riskdiscussed in the question has been identified, but it is not occurring at this time, so there is noneed to take the action of creating a workaround. You need to analyzed the problem beforeto the sponsor. You cannot mitigate the risk until you qualify it. Qualifying the risk will help youdetermine how to proceed. |
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The cost performance index (CPI) of a project is 0.6 and the schedule performance index (SPI)is 0.71. The project has 625 work packages and is being completed over a four-year period. Theteam members are very inexperienced and the project received little support for proper planning.Which of the following is the BEST thing to do?
A. Update risk identification and analysis. B. Spend more time improving the cost estimates. C. Remove as many work packages as possible. D. Reorganize the responsibility assignment matrix. |
Answer A Explanation This project has deviated so far from the baseline that updated risk identificationand risk analysis should be performed. |
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While preparing your risk responses, you identify additional risks. What should you do?
A. Add reserves to the project to accommodate the new risks and notify management. B. Document the risk items and calculate the expected monetary value based on the probabilityand impact of the occurrences. C. Determine the risk events and the associated costs, then add the cost to the project budget as areserve. D. Add a 10 percent contingency to the project budget and notify the customer. |
Answer B Explanation When new risks are identified, they should go through the risk managementprocess. You need to determine the probability and impact of the risks and then try to diminishthem through the Plan Risk Responses process. Only after these efforts should you consideradding reserves for time and/ or cost. Any reserves should be based on a detailed analysis of risk.Calculating the expected monetary value of the risks is an important part of the risk managementprocess, and the best choice presented here. |
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During project executing, a team member identifies a risk that is not in the risk register. Whatshould you do? A. Get information on how the team member identified the risk, because you already performed a detailed analysis and did not identify this risk. B. Disregard the risk, because risk were identified during project planning. C. Inform the customer about the risk. D. Analyze the risk. |
Answer D Explanation First, you want to determine what the risk entails and the impact to the project, thendetermine what actions you will take regarding the risk. |
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During project executing, a major problem occurs that was not included in the risk register. What should you do FIRST? A. Create a workaround. B. Reevaluate the Identify Risks process. C. Look for any unexpected effects of the problem. D. Tell management. |
Answer A Explanation Following the right process is part of professional and social responsibility. Becausean unidentified problem or risk occurred, it is important to reevaluate the Identify Risks processas well as to look for unexpected effects of the problem. However, they are not your first choices.You might need to inform management, but this is reactive, not proactive, and not the first thingyou should do. Since this is a problem that has occurred, rather than a problem that has just beenidentified, the first thing you must do is address the risk by creating a workaround. |
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Which of the following is a chief characteristic of the Delphi technique? A. Extrapolation from historical records from previous projects B. Expert opinion C. Analytical hierarchy process D. Bottom-up approach |
Answer B Explanation The Delphi technique uses experts and builds consensus; therefore, expert opinionis the chief characteristic. |
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A project has had some problems, but now seems under control. In the last few months, almost allthe reserve has been used up and most of the negative impacts of events that had been predictedhave occurred. There are only four activities left, and two of them are on the critical path.Management now informs the project manager that it would be in the performing organization'sbest interest to finish the project two weeks earlier than scheduled, in order to receive anadditional profit. In response, the project manager sends out a request for proposal for some workthat the team was going to do, hoping to find another company that might be able to do the workfaster. The project manager can BEST be said to be attempting to work with: A. Reserve. B. Opportunities. C. Scope validation. D. Threats. |
Answer B Explanation The wording of this question can be confusing. Scope validation involves meetingwith the customer to gain formal acceptance, so that cannot be the best choice. Reserve ismentioned in the situation, but the use of reserves is not the primary concern. The projectmanager is working to make a positive impact on the project more likely to occur. Therefore,he is working with an opportunity. This may include analyzing the appropriateness of usingmamagerne1m reserves to cover the cost of the opportunity. |
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Monte Carlo analysis is used to: A. Get an indication of the risk involved in the project. B. Estimate an activity's length. C. Simulate possible quality issues on the project. D. Prove to management that extra staff is needed. |
Answer A Explanation A Monte Carlo analysis could indicate that an estimate for an activity needs to change, but not what activity estimate should be. Monte Carlo is a stimulation. but it does not specifically address quality. It does not deal directly with staff or resources needs either. Project risk can be assessed using Monte Carlo analysis. By considering the input to the weighted estimates and the network diagram, you can obtain a better overview of the overall project risk. |
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A project team is creating a project management plan when management asks them to identifyproject risks and provide some form of qualitative output as soon as possible. What should theproject team provide? A. Prioritized list of project risk. B. Risk triggers. C. Contingency reserves. D. Probability of achieving the time and cost objective. |
Answer A Explanation This question essentially asks, "What is an output of Perform Qualitative RiskAnalysis?" The probability of achieving time and cost objectives is determined during the PerformQuantitative Risk Analysis process. Risk triggers and contingency reserves are parts of the PlanRisk Responses process. A prioritized list of risks is an output of Perform Qualitative Risk Analysis. |
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A project manager is creating a risk response plan. However, every time a risk response issuggested, another risk is identified that is caused by the response. Which of the following is theBEST thing for the project manager to do? A. Document the new risks and continue the Plan Risk Responses process. B. Make sure the project work is better understood. C. Spend more time making sure the risk responses are clearly defined. D. Get more people involved in the Identify Risks process, since risks have been missed. |
Answer A Explanation Did you realize this question describes secondary risks? Identifying secondary risksis an important part of completing the Plan Risk Responses process. With that in mind, the bestthing to do is to document the newly identified risks and continue the Plan Risk Responses process. |
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A watch list is an output of which risk management process? A. Plan Risk Responses B. Perform Quantitative Risk Analysis C. Perform Qualitative Risk Analysis D. Plan Risk Management |
Answer C Explanation A watch list is made up of low-priority risks that, in the Perform Qualitative RiskAnalysis process, were determined to be of too low priority or low impact to move further in therisk management process. |
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During the Identify Risks process, a project manager and stakeholders used various methods toidentify risks and then created a long list of those risks. The project manager then made sure allthe risks were understood and that triggers had been identified. Later, in the Plan Risk Responsesprocess, he took all the risks identified by the stakeholders and determined ways to mitigate them.What has he done wrong? A. The project manager should have waited until the Perform Qualitative Risk Analysis process toget the stakeholders involved. B. More people should have been involved in the Plan Risk Responses process. C. The project manager should have created workarounds. D. Triggers should not be identified until the Identify Risks process. |
Answer B Explanation Stakeholders should be included in the Identify Risks process. Some triggers maybe identified in the Identify Risks process, but they are generally identified and added to therisk register in the Plan Risk Responses process. Workarounds are created as unidentified riskevents occur. The project manager's error was not including others in the Plan Risk Responsesprocess. Plan Risk Responses must include the involvement of all risk owners and possibly otherstakeholders. |
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Which of the following MUST be an agenda item at all team meetings? A. Discussion of project risks B. Status of current activities C. Identification of new activities D. Review of project problems |
Answer A Explanation Risk is so important that it must be discussed at all team meetings. |
