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40 Cards in this Set

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As the project manager, you have the option of proposing one of three systems to a client: a full-feature system that not only satisfies the minimum requirements but also offers numerous special functions (the “Mercedes”); a system that meets ...

As the project manager, you have the option of proposing one of three systems to a client: a full-feature system that not only satisfies the minimum requirements but also offers numerous special functions (the “Mercedes”); a system that meets the client’s minimum requirements (the “Yugo”); and a system that satisfies the minimum requirements plus has a few extra features (the “Toyota”). The on-time records and associated profits and losses are depicted on the below decision tree. What is the expected monetary value of the “Toyota” system?



a. $9,900
b. $44,000
c. $45,000
d. $48,000



A risk response strategy that can be used for both threats and opportunities is—



a. Share
b. Avoid
c. Accept
d. Transfer

c. Accept



Risk exists on every project, and it is unrealistic to think it can be eliminated completely. There are certain risks that simply must be accepted because we cannot control whether or not they will occur (for example, an earthquake). Acceptance is a strategyfor dealing with risk that can be used for both threats and opportunities. [Planning]
PMI®, PMBOK® Guide, 2013, 345–346

The risk urgency assessment is a tool and technique used for—



a. Plan risk responses
b. Identify risks
c. Perform qualitative risk analysis
d. Perform quantitative risk analysis

c. Perform qualitative risk analysis



Risks that may happen in the near-term need urgent attention. The purpose of the risk urgency assessment is to identify those risks that have a high likelihood of happening sooner rather than later. It is combined with the risk ranking to give a final risk severity ranking [Planning]
PMI®, PMBOK® Guide, 2013, 333

Projects are particularly susceptible to risk because—



a. Murphy’s law states that “if something can go wrong, it will”
b. There is uncertainty in all projects
c. Project management tools are generally unavailable at the project team level
d. There are never enough resources to do the job

b. There is uncertainty in all projects



Every project has uncertainty associated with it because a project by its definition is a temporary endeavor undertaken to create a unique product, service, or result. Risks may be known or unknown. [Planning]
PMI®, PMBOK® Guide, 2013, 3 and 310

As project manager, you have assembled the team to prepare a comprehensive list of project risks. Which one of the following documents would be the most helpful in this process?



a. OBS
b. WBS
c. RBS
d. CBS

c. RBS



The risk breakdown structure (RBS) helps to provide framework for ensuring a comprehensive process of systematically identified risks. It is a hierarchically organized depiction of the identified risks by risk categories. [Planning]
PMI®, PMBOK® Guide, 2013, 317, 332

You are working on identifying possible risks to your project to develop a nutritional supplement. You want to develop a comprehensive list of risks that can be addressed later through qualitative and quantitative risk analysis. An information gathering technique used to identify risks is—



a. Documentation reviews
b. Probability and impact analysis
c. Checklist analysis
d. Brainstorming

d. Brainstorming



Brainstorming is a frequently used information-gathering technique for identifying risk, because it enables the project team to develop a list of potential risks relatively quickly. Project team members, or invited experts, participate in the session. Risks are easily categorized for follow-on analysis. [Planning]
PMI®, PMBOK® Guide, 2013, 324

The Delphi technique is a particularly useful method for identifying risks to—



a. Present a sequence of decision choices graphically to decision makers
b. Define the probability of occurrence of specific variables
c. Reduce bias in the analysis and keep any one person from having undue influence on the outcome
d. Help take into account the attitude of the decision maker toward risk

c. Reduce bias in the analysis and keep any one person from having undue influence on the outcome



The Delphi technique provides a means for arriving at a consensus using a panel of experts to determine a solution to a specific problem. Project risk experts are identified but participate anonymously. Each panelistanswers a questionnaire. Then the responses, along with opinions and justifications, are evaluated, and statistical feedback is given to each panel member. The process continues until group responses converge toward a solution. [Planning]
PMI®, PMBOK® Guide, 2013, 324
Wideman 1992, C-2 and C-3

A workaround is—



a. An unplanned response to a negative risk event
b. A plan of action to follow when something unexpected occurs
c. A specific response to certain types of risk as described in the risk management plan
d. A proactive, planned method of responding to risks

a. An unplanned response to a negative risk event



Used in control risks, a workaround is a response to a threat that has occurred for which a prior response had not been planned or was not effective. [Monitoring and Controlling]
PMI®, PMBOK® Guide, 2013, 567

Most statistical simulations of budgets, schedules, and resource allocations use which one of the following approaches?



a. PERT
b. Decision-tree analysis
c. Present value analysis
d. Monte Carlo analysis

d. Monte Carlo analysis



Simulations are typically performed using Monte Carlo in which a project model is computed many times with the input values chosen at random for each iteration from the probability distribution of these variables. Monte Carlo analysis supports various statistical distributions (normal, triangular, beta, uniform, etc.) used in estimating budgets, schedules, and resource allocations. [Planning]
Frame 2002, 89
PMI®, PMBOK® Guide, 2013, 340

In the below path convergence example, if the odds of completing activities 1, 2, and 3 on time are 50 percent, 50 percent, and 50 percent, what are the chances of starting activity 4 on day 6?
 
a. 10 percent
b. 13 percent
c. 40 percent
d. 50 per...

In the below path convergence example, if the odds of completing activities 1, 2, and 3 on time are 50 percent, 50 percent, and 50 percent, what are the chances of starting activity 4 on day 6?



a. 10 percent
b. 13 percent
c. 40 percent
d. 50 percent



A project health check identified a risk that your project would not be completed on time. As a result, you are quantifying the project’s risk exposure and determining what cost and schedule contingency reserves might be needed. You performed a schedule risk analysis using Monte Carlo analysis. The basis for your schedule risk analysis is the—



a. WBS
b. Gantt chart
c. Schedule network diagram and duration estimates
d. Probability/impact risk rating matrix

c. Schedule network diagram and duration estimates



When determining the likelihood of meeting the project’s schedule end date through Monte Carlo, the schedule network diagram and duration estimate are used as inputs to the simulation program. Cost risk, on the other hand, uses cost estimates from the WBS. [Planning]
PMI®, PMBOK® Guide, 2013, 340

You are developing radio frequency (RF) technology that will improve overnight package delivery. You ask each stakeholder to estimate the most optimistic package delivery time using the RF technology, the most pessimistic time, and the most likely time. This shows that for your next step you plan to—



a. Use a beta or triangular probability distribution
b. Conduct a sensitivity analysis
c. Structure a decision analysis as a decision tree
d. Determine the strategy for risk response

a. Use a beta or triangular probability distribution



Interviews often are used to help quantify the probability and consequences of risks on project objectives. The type of information collected during the interview depends on the type of probability distribution that is used. A beta or triangular distribution is used widely when information is gathered on the optimistic (low), pessimistic (high), and most likely scenarios. [Planning]
PMI®, PMBOK® Guide, 2013, 336–337

Each one of the following statements about risk avoidance is true EXCEPT that it—



a. Focuses on changing the project management plan to eliminate entirely the threat
b. Isolates the project’s objectives from the risk’s impact
c. Accepts the consequences of the risk event should it occur
d. Changes the project objective that is in jeopardy

c. Accepts the consequences of the risk event should it occur



Accepting the consequences of the risk event is categorized as risk acceptance. With this risk response approach, the project team takes no action to reduce the probability of the risk’s occurring. [Planning]
PMI®, PMBOK® Guide, 2013, 344–345

If the probability of event 1 is 80 percent and of event 2 is 70 percent and they are independent events, how likely is it that both events will occur?



a. 6 percent
b. 15 percent
c. 24 percent
d. 56 percent

d. 56 percent



The likelihood is determined by multiplying the probability of event 1 by the probability of event 2. [Planning]
PMI®, PMBOK® Guide, 2013, 331–332
Wideman 1992, IV-7

The project scope statement should be used in the identify risk process because it—



a. Identifies project assumptions
b. Identifies all the work that must be done and, therefore, includes all the risks on the project
c. Helps to organize all the work that must be done on the project
d. Contains information on risks from prior projects

a. Identifies project assumptions



Project assumptions, which should be enumerated in the project scope statement, are areas of uncertainty, and as such are potential causes of project risk. The scope statement and the WBS are part of the scope baseline, an input to identify risks. [Planning]
PMI®, PMBOK® Guide, 2013, 322

Your project team has identified all the risks on the project and has categorized them as high, medium, and low. The “low” risks are placed on which one of the following for monitoring?



a. Threat list
b. Low risk list
c. Watch list
d. Low impact list

c. Watch list



Even low-priority risks must be monitored. A watch list is used to ensure such risks are tracked for continued monitoring. [Planning]
PMI®, PMBOK® Guide, 2013, 347

A general contingency is used for—



a. Risks that are identified at the outset of the project
b. Risks that are not identified at the outset of the project but are known before they occur
c. Risks that cannot be known before they occur because they are external risks
d. Any risks that cannot be known before they occur

d. Any risks that cannot be known before they occur



There is a category of risks that is sometimes called unknown-unknowns, meaning that the risk is not knowable and, therefore, the probability of the risk is also not knowable. Your lead technical advisor becoming seriously ill, your offices being ransacked by persons engaged in industrial espionage, or one of your subcontractors winning the lottery and running off to the Cayman Islands are all examples of risks that are not known before they occur. However, such risks must be expected and a general contingency can be set aside to address the impact they leave in their wake. [Monitoring and Controlling]
PMI®, PMBOK® Guide, 2013, 310, 346, 348, and 533
Pritchard 2005, 183–188

The simplest form of quantitative risk analysis and modelingtechniques is—



a. Probability analysis
b. Sensitivity analysis
c. Delphi technique
d. Utility theory

b. Sensitivity analysis



Sensitivity analysis, as a quantitative risk analysis and modeling technique, helps to determine the risks that have the most potential impact on the project. It examines the extent to which the uncertainty of each project element affects the objective being examined when all other uncertain elements are held at their baseline values. [Planning]
PMI®, PMBOK® Guide, 2013, 338
Wideman 1992, C-1 and C-2

If a business venture has a 60-percent chance to earn $2 million and a 20-percent chance to lose $1.5 million, what is the expected monetary value of the venture?



a. –$50,000
b. $300,000
c. $500,000
d. $900,000

d. $900,000



EMV = ($2M × 60%) + (–$1.5M × 20%) =
($1.2M) + (–$300,000) = $900,000
[Planning]
Frame 2002, 192
PMI®, PMBOK® Guide, 2013, 339

You are managing the construction of a highly sophisticated data center in Port Moresby, Papua, New Guinea. Although this location offers significant economic advantages, the threat of typhoons has caused you to create a backup plan to operate in Manila in case the center is flooded. This plan is an example of what type of risk response?



a. Passive avoidance
b. Mitigation
c. Active acceptance
d. Deflection

c. Active acceptance



Active acceptance means not only accepting the consequences of a risk, but also establishing a plan for dealing with the risk, should it occur. Organizations typically establish a contingency plan funded by a contingency reserve (of time, money, or resources) to handle known, or even sometimes potential unknown, threats or opportunities. [Planning]
PMI®, PMBOK® Guide, 2013, 345

A recent earned value analysis shows that your project is 20 percent complete, the CPI is 0.67, and the SPI is 0.87. In this situation, you should—



a. Perform additional resource planning, add resources, and use overtime as needed to accomplish the same amount of budgeted work
b. Rebaseline the schedule, then use Monte Carlo analysis
c. Conduct a risk response audit to help control risk
d. Forecast potential deviation of the project at completion from cost and schedule targets

d. Forecast potential deviation of the project at completion from cost and schedule targets



Earned value is used for monitoring overall project performance against a baseline plan. It is a part of variance analysis, a tool and technique in control risks. [Monitoring and Controlling]
PMI®, PMBOK® Guide, 2013, 352

The purpose of a numeric scale in risk management is to—



a. Avoid high-impact risks
b. Assign a relative value to the impact on project objectives if the risk in question occurs
c. Rank order risks in terms of very low, low, moderate, high, and very high
d. Test project assumptions

b. Assign a relative value to the impact on project objectives if the risk in question occurs



You can develop relative or numeric, well-defined scales using agreed-upon definitions by the stakeholders. When using a numeric scale, each level of impact has a specific number assigned to it. [Planning]
PMI®, PMBOK® Guide, 2013, 331–332

Risk score measures the—



a. Variability of the estimate
b. Product of the probability and impact of the risk
c. Range of schedule and cost outcomes
d. Reduced monetary value of the risk event

b. Product of the probability and impact of the risk



The risk score provides a convenient way to compare risks because comparing impacts or probabilities alone is meaningless. It helps guide risk responses. [Planning]
PMI®, PMBOK® Guide, 2013, 332

Which of the following is an example of recommended corrective action in risk management?



a. Conducting a risk audit
b. Engaging in additional risk response planning
c. Performing the contingency plan
d. Conducting a risk review

c. Performing the contingency plan



Corrective action in risk management is the process of making changes to bring expected performance in line with the risk management plan. Such action consists of performing either the planned risk response, such as implementing contingency plans, or a workaround. [Monitoring and Controlling]
PMI®, PMBOK® Guide, 2013, 353

The primary advantage of using decision-tree analysis in project risk management is that it—



a. Considers the attitude of the decision maker toward risk
b. Forces consideration of the probability of each outcome
c. Helps to identify and postulate risk scenarios for the project
d. Shows how risks can occur in combination

b. Forces consideration of the probability of each outcome



As a graphical way to bring together information, decision-tree analysis quantifies the likelihood of failure and places a value on each decision. Usually applied to cost and time considerations, this form of risk analysis may be linked to a sensitivity analysis. [Planning]
PMI®, PMBOK® Guide, 2013, 339
Wideman 1992, C-2 and C-3

Your project is using complex, unproven technology. Your team conducted a brainstorming session to identify risks. Poor allocation of project resources was the number one risk. This risk was placed on the risk register, which included at this point a—



a. Watch list
b. Potential risk response
c. Known unknown
d. List of other risks requiring additional analysis

b. Potential risk response



The risk register is prepared first in the identify risks process. It contains a list of identified risks in as much detail as possible and a list of potential responses when they are identifiable at this time. [Planning]
PMI®, PMBOK® Guide, 2013, 327

When managing current projects, it is important to use lessons learned from previous projects to improve the organization’s project management process. Therefore, in project closing procedures, it is important to review the—



a. Secondary risks that occurred
b. Checklists for identify risks
c. WBS dictionary
d. Fallback plan

b. Checklists for identify risks



Checklists are a tool and a technique of the identify risks process and include risks encountered on similar, previous projects identified through the lessons learned process and from other sources. The projectteam should review the checklist as part of the identify risks process as well as during closeout. The team should add to the list as necessary, based on its experience, to help others in the future. [Planning]
PMI®, PMBOK® Guide, 2013, 325

Risk mitigation involves—



a. Using performance and payment bonds
b. Eliminating a specific threat by eliminating the cause
c. Avoiding the schedule risk inherent in the project
d. Reducing the probability and/or impact of an adverse risk event to an acceptable threshold

d. Reducing the probability and/or impact of an adverse risk event to an acceptable threshold



It is often more effective to take early action to reduce probability and/or impact of a risk occurring on a project than attempting to repair the damage after the risk has occurred. [Planning]
PMI®, PMBOK® Guide, 2013, 345

On a typical project, when are risks highest and impacts (amount at stake) lowest?



a. During the concept phase
b. At or near completion of the project
c. During the implementation phase
d. When the project manager is replaced

a. During the concept phase



Risks are highest at the beginning of a project because the project faces an uncertain future, and impacts are lowest at this time because investments in human and material resources are minimal. [Planning]
Frame 2002, 80; PMI®, PMBOK® Guide, 2013, 40
Wideman 1992, II-1–II-5

Two key inputs to the perform quantitative risk analysis process are the—



a. WBS and milestone list
b. Scope management plan and process improvement plan
c. Schedule management plan and cost management plan
d. Procurement management plan and quality baseline

c. Schedule management plan and cost management plan



The cost and schedule of a project are two areas significantly affected by risk occurrences. Information on these two areas, because of their quantitative nature, provides excellent input to the perform quantification risk process to help determine overall impact and to provide guidelines as managing risk reserves. [Planning]
PMI®, PMBOK® Guide, 2013, 335

The highest risk impact generally occurs during which one of the following project life-cycle phases?



a. Concept and planning
b. Planning and implementation
c. Implementation and closeout
d. Concept and closeout

c. Implementation and closeout



Opportunity and risk generally remain high during the concept and planning phases. However, the amount at stake remains low because of the relatively low level of investment up to that point. During project implementation and closeout, however, risk falls to lower levels as remaining unknowns are translated into knowns. At the same time, the amount at stake rises steadily as the necessary resources are invested to complete the project. [Planning]
PMI®, PMBOK® Guide, 2013, 40; Wideman 1992, II-5–II-6

Which one of the following statements best characterizes an activity cost or duration estimate developed with a limitedamount of information?



a. It should be part of the planning for the needed management reserve.
b. It is an input to identify risks.
c. It is an output from identify risks.
d. It must be factored into the list of prioritized project risks.

b. It is an input to identify risks.



Much of the output from planning in other knowledge areas, such as activity cost and duration estimates, may entail risk and is reviewed during the identify risks process. This process requires an understanding of the schedule, cost, and quality management plans found in the project management plan. Estimates that are aggressive or developed with a limited amount of information are even more likely to entail risk and, therefore, must also be an input to the identify risks process. [Planning]
PMI®, PMBOK® Guide, 2013, 321–322

What is the primary difference between a risk audit and a risk reassessment?



a. A risk reassessment is conducted at the completion of a major phase; audits are conducted after the project is complete.
b. Project stakeholders conduct risk audits; management conducts reassessments.
c. Risk reassessments are regularly scheduled; risk audits are performed as defined in the project’s risk management plan.
d. There is no difference; they are virtually the same.

c. Risk reassessments are regularly scheduled; risk audits are performed as defined in the project’s risk management plan.



Risk reassessment is an ongoing activity by the project team. Risks should be discussed at every status meeting. Risk audits are performed during the project life cycle to examine and document the effectiveness of risk responses. They are conducted at appropriate frequencies as defined in the risk management plan. [Monitoring and Controlling]
PMI®, PMBOK® Guide, 2013, 351

Accurate and unbiased data are essential for perform qualitative risk analysis. Which one of the following should you use to examine the extent of understanding of project risk?



a. Data quality assessment
b. Project assumptions testing
c. Sensitivity analysis
d. Influence diagrams

a. Data quality assessment



Perform qualitative risk analysis requires accurate and unbiased data. The use of low-quality data may result in a qualitative risk analysis that is of little use to the project manager regarding understanding of the risk, data available about the risk, data quality, and data reliability and integrity. [Planning]
PMI®, PMBOK® Guide, 2013, 332

Assigning more talented resources to the project to reduce time to completion or to provide better quality than originally planned are examples of which one of the following strategies?



a. Enhance
b. Exploit
c. Share
d. Contingent response

b. Exploit



Although it might have a negative connotation, exploitation is a strategy used for risks with positive impacts where the organization wants to ensure that the opportunity is realized. [Planning]
PMI®, PMBOK® Guide, 2013, 345

Which of the following is NOT an objective of a risk audit?



a. Confirming that risk management has been practiced throughout the project life cycle
b. Confirming that the project is well managed and that the risks are being controlled
c. Evaluating the effectiveness of risk responses in dealing with identified risks
d. Ensuring that each risk identified and deemed critical has a computed expected value

d. Ensuring that each risk identified and deemed critical has a computed expected value



It is not feasible or necessary to quantify every risk. Therefore, a risk audit should never have as an objective to ensure that each project risk has a computed expected value. [Monitoring and Controlling]
PMI®, PMBOK® Guide, 2013, 351

Contingency planning involves—



a. Defining the steps to be taken if an identified risk event should occur
b. Establishing a management reserve to cover unplanned expenditures
c. Preparing a stand-alone document that is separate from the overall project plan
d. Determining needed adjustments to make during the implementation phase of a project

a. Defining the steps to be taken if an identified risk event should occur



For some risks it is appropriate for the project team to make a response plan that will be executed only under certain predefined conditions if it is believed that there will be sufficient warning to implement the plan. [Planning]
PMI®, PMBOK® Guide, 2013, 346

Assume that you are working on a new product for your firm. Your CEO learned that a competitor was about to launch a new product that has similar features to those of your project. The competitor plans to launch the product on September 1. It is now March 1. Your schedule called for you to launch your product on December 1. Your CEO now has now mandated that you fast track your project so you can launch your product on August 1. This fast track schedule is an example of an—



a. Unknown risk
b. A risk taken to achieve a reward
c. A response that requires sharing the risk
d. A passive avoidance strategy

b. A risk taken to achieve a reward



Project risk has its origin in the uncertainty that is present in all projects. Organizations and stakeholders are willing to accept varying degrees of risk, and risks that are threats to the project may be accepted if the risks are within tolerances and are in balance with the rewards to be gained. This example of adopting a fast-track schedule is a risk taken to achieve the reward created by the earlier completion date. [Planning]
PMI®, PMBOK® Guide, 2013, 345

As head of the project management office, you need to focus on those items where risk responses can lead to better project outcomes. One way to help you make these decisions is to—



a. Use a probability and impact matrix
b. Assess trends in perform quantitative risk analysis results
c. Prioritize risks and conditions
d. Assess trends in perform qualitative risk analysis results

a. Use a probability and impact matrix



The probability and impact matrix can be used to classify risks according to their level of impact and to prioritize them for future quantitative analyses and responses based on their rating. Typically these risk rating rules are specified by the organization in advance of the project. The matrix specifies combinations of probability and impact that lead to rating the risks as low, moderate, or high priority. [Planning]
PMI®, PMBOK® Guide, 2013, 331–332

You are the project manager for the construction of an incinerator to burn refuse. Local residents and environmental groups are opposed to this project. Management agrees to move this project to a different location. This is an example of which one of the following risk responses?



a. Passive acceptance
b. Active acceptance
c. Mitigation
d. Avoidance

d. Avoidance



Risk avoidance involves changing the project management plan to eliminate the threat entirely. [Planning]
PMI®, PMBOK® Guide, 2013, 344