Chapter 11 Project Risk Management

What are the five steps of a Monte Carlo Analysis?

1. Assess the range for the variables being considered 2. Determine the probability distribution of each variable 3. For each variable, select a random value based on the probability distribution 4. Run a deterministic analysis or one pass through the model 5. Repeat steps 3 and 4 many times to obtain the probability distribution of the model's results

A risk register is _______.

A document that contains the results of various risk management processes and that is often displayed in a table or spreadsheet format

Planning risk responses

After identifying and quantifying risks, you must decide how to respond to them

Risk sharing is a response strategy for positive risks.

Allocate ownership to third party who is best able the capture the opportunity

Risk register contents include ________.

An identification number for each risk event A rank for each risk event The name of each risk event A description of each risk event The category under which each risk event falls The root cause of each risk Triggers for each risk triggers are indicators or symptoms of actual risk events Potential responses to each risk The risk owner or person who will own or take responsibility for each risk The probability and impact of each risk occurring. The status of each risk

What is project risk?

An uncertain event or condition that, if it occurs, has a positive or negative effect on at least one project objective, such as time, cost, scope or quality.

Performing Qualitative Risk Anlaysis

Assess the likelihood(probability)and impact of identified risks to determine their magnitude and priority

Risk identification tools and techniques include _____.

Brainstorming The Delphi Technique Interviewing SWOT analysis

_______ or ________ are provisions held by the project sponsor or organization to reduce the risk of cost or schedule overruns to an acceptable level.

Contingency reserves or allowances

_______ involves executing the risk management process to respond to risk events and ensuring that risk awareness is an ongoing activity performed by the entire project team throughout the entire project.

Controlling Risk

Planning risk management

Deciding how to approach and plan the risk management activities for the project

Main Quantitative Risk Analysis techniques include _______.

Decision tree analysis Simulation Sensitivity analysis

Identifying risks

Determining which risks are likely to affect a project and documenting the characteristics of each

Risk acceptance is a response strategy for negative risks.

Do nothing to prevent

Risk acceptance is a response strategy for positive risks.

Do nothing to prevent

Risk avoidance is a response strategy for negative risks.

Eliminate the threat by eliminating the cause

Risk exploitation is a response strategy for positive risks.

Eliminate the uncertainty associated with the opportunity - ensure it will happen

_______ is the product of a risk event probability and the risk event's monetary value.

Estimated monetary value (EMV)

How many steps are in a Monte Carlo Analysis?

Five

Risk enhancement is a response strategy for positive risks.

Increase the probability and/ or impact - strengthen the cause of the opportunity

Risk transference is a response strategy for negative risks.

Make another party responsible for the risk

Causes of variation deal with Unknown unknowns using _____?

Management Contingency Reserves

________ are funds held for unknown risks.

Management reserves

Controlling risk

Monitoring identified and residual risks, identifying new risks, carrying out risk response plans, and evaluating the effectiveness of risk strategies throughout the life of the project

_______ simulates a model's outcome many times to provide a statistical distribution of the calculated results.

Monte Carlo analysis

What is negative risk?

Negative risk involves understanding potential problems that might occur in the project and how they might impede project success

What is risk probability?

Numbers that represent the overall risk of specific events based on their probability of occurring and the consequences to the project if they do occur

Performing quantitative risk analysis

Numerically estimating the effects of risks on project objectives

Project risk management main processes include ______.

Plan risk management Identify risks Perform qualitative risk analysis Perform quantitative risk analysis Plan risk responses Control risks

What are the Project Risk Management Processes?

Planning risk management Identifying risks Performing qualitative risk analysis Performing quantitative risk analysis Planning risk responses Controlling risk

Performing qualitative risk analysis

Prioritizing risks based on their probability and impact of occurrence

What is the formula for Expected Monetary Value?

Probability (P) * Outcome = Expected Monetary Value

What does PI stand for?

Probability Impact

Risk qualification tools and techniques include ______.

Probability/impact matrixes The Top Ten Risk Item Tracking Expert judgment

Causes of variation deal with Known knowns using _____?

Project Mgmt. Plan

________ can also identify risks that should be evaluated on a quantitative basis.

Qualitative analysis

Risk mitigation is a response strategy for negative risks.

Reduce the probability and/or consequences of an adverse risk event

_____ are risks that remain after all of the response strategies have been implemented.

Residual risks

Causes of variation deal with Known unknowns using _____?

Risk Response Management Plan Contingency Reserves

______ are a direct result of implementing a risk response.

Secondary risks

Many people use ______ to determine what the monthly payments for a loan will be given different interest rates or periods of the loan, or for determining break-even points based on different assumptions.

Sensitivity analysis

_____ is a technique used to show the effects of changing one or more variables on an outcome.

Sensitivity analysis

_____ uses a representation or model of a system to analyze the expected behavior or performance of the system.

Simulation

There are _____ Project Risk Management Processes?

Six

Risk events refer to _________?

Specific, uncertain events that may occur to the detriment or enhancement of the project

______ is a common tool for performing sensitivity analysis.

Spreadsheet software, such as Excel

Planning risk responses

Taking steps to enhance opportunities and reduce threats to meeting project objectives

Risk encompasses what?

The Triple Constraint

What is the triple constraint?

Time, Cost, Scope & Quality

Risks can be positive.

True

The level of detail in a Risk Project Management Plan will vary with the needs of the project?

True

You can draw a decision tree to help find the EMV.

True

Main outputs of risk control are ________.

Work performance information Change requests Updates to the project management plan, other project documents, and organizational process assets

_______ are unplanned responses to risk events that must be done when there are no contingency plans.

Workarounds

Negative risk management is like _______.

a form of insurance; it is an investment

Fallback plans are developed for risks that have ______?

a high impact on meeting project objectives and are put into effect if attempts to reduce the risk are not effective

What is a Risk Management Plan?

a plan that documents the procedures for managing risk throughout a project.

Project plans are only the _________ that can be made for planned events.

best educated forecast

A probability/impact matrix _________.

can also calculate risk factors

A ______ is a diagramming analysis technique used to help select the best course of action in situations in which future outcomes are uncertain.

decision tree

A risk register is a tool for ________.

documenting potential risk events and related information

Large, complex projects involving leading edge technologies often require ___________.

extensive quantitative risk analysis

In a probability/impact matrix list the risks and then label each one as _______ in terms of its ________ and its ________.

high, medium, or low probability of occurrence impact if it did occur

Risk utility is _______?

is the amount of satisfaction or pleasure received from a potential payoff

Contingency reserves or allowances are held for ______.

known risks

Good Project Managers _________ (through process management)

minimize variation

What three estimates are used in a Monte Carlo simulation?

most likely pessimistic optimistic plus an estimate of the likelihood of the estimate being between the most likely and optimistic values

Four main response strategies for ______.

negative risks

Performing Quantitative Risk Analysis _______.

often follows qualitative risk analysis, but both can be done together.

A risk may have ______ and, if it occurs, _______.

one or more causes one or more consequences

Contingency plans are _______?

predefined actions that the project team will take if an identified risk event occurs

A _______ lists the relative probability of a risk occurring on one side of a matrix or axis on a chart and the relative impact of the risk occurring on the other

probability/impact matrix or chart

The ______ should review project documents and understand the organization's and the sponsor's approaches to risk.

project team

A ________ is a hierarchy of potential risk categories for a project.

risk breakdown structure

The main output of risk management planning is a ________.

risk management plan

Risk utility is also known as _______?

risk tolerance

Utility rises at a decreasing rate for people who are _____?

risk-averse

The ______ achieves a balance between risk and payoff

risk-neutral approach

Those who are ______ have a higher tolerance for risk, and their satisfaction increases when more payoff is at stake

risk-seeking

Four main response strategies for positive ______.

risks

Positive risks are _______?

risks that result in good things happening; sometimes called opportunities

Project risk management is ______?

the art and science of identifying, analyzing, and responding to risk throughout the life of a project and in the best interests of meeting project objectives

Identifying risks is ________.

the process of understanding what potential events might hurt or enhance a particular project

The main output of _______ is a list of identified risks and other information needed to begin creating a risk register.

the risk identification process

To use a Monte Carlo simulation, you must have _______.

three estimates

A risk breakdown structure is similar to a work breakdown structure but is _______.

used to identify and categorize risks

A ______ is a list of risks that are low priority but are still identified as potential risks

watch list