CHAPTER 7 F'REAL
15. _____________ is a measure of how easy it would be to notice that a risk event was going to occur in time to take mitigating action, that is, how much warning you would have. A. Detection difficulty B. Impact scaling C. Probability analysis D. Awareness level E. Warning assessment
A. Detection difficulty
34. This response is used to remove any uncertainly associated with an identified Opportunity. A. Exploit B. Share C. Enhance D. Accept
A. Exploit
8. Organizations use __________ in conjunction with work breakdown structures to help management teams identify and eventually analyze risk. A. Risk breakdown structures B. Contingency breakdown structures C. Scenario analysis D. Organizational breakdown structure E. Risk assessment
A. Risk breakdown structures
11. A list of questions that address traditional areas of uncertainty on a project is termed a A. Risk profile. B. Questionnaire. C. Research matrix. D. Query. E. Checklist.
A. Risk profile.
3. The cost impact of a risk event occurring as a project proceeds through its life cycle tends to A. Slowly rise. B. Drop sharply and then level out. C. Rise sharply and then level out. D. Remain about the same. E. Slowly drop.
A. Slowly rise.
29. Risks that can result in a system or process that will not work are known as A. Technical risks. B. Funding risks. C. Schedule risks. D. Cost risks. E. Unnecessary risks.
A. Technical risks.
60. ________ reserves are identified for specific work packages and are distributed by the project manager and the team members.
Budget
96. What is the difference between budget reserves and management reserves?
Budget reserves are controlled by team participants and have been identified for known risks that have a low chance of occurring and are directly associated with specific work packages. Management reserves are controlled by the project manager and the project "owner" and cover items which were unforeseen usually at the total project level.
40. The implications of an identified change need to be assessed by: A. The primary project stakeholder. B. The Chief Fiscal Officer. C. A person with expertise related to the change. D. The authorizing project manager.
C. A person with expertise related to the change.
13. Tools such as a risk assessment form and a risk severity matrix are used to A. Identify risks. B. Control risks. C. Assess risks. D. Regulate risks. E. Respond to risks.
C. Assess risks.
36. This response is used to increase the potential effect of an identified Opportunity. A. Exploit B. Share C. Enhance D. Accept
C. Enhance
6. The initial step in the risk management process is to A. Determine the level of acceptable risk. B. Assess the risk potential. C. Identify the risks. D. Set aside budget funds for managing the risks. E. Appoint a risk manager.
C. Identify the risks.
24. Which of the following is NOT one of the potential responses to a specific risk event? A. Mitigating B. Retaining C. Ignoring D. Transferring E. Avoiding
C. Ignoring
1. An uncertain event or condition that, if it occurs, has a positive or negative effect on project objectives is termed a A. Random chance. B. Disaster. C. Risk. D. Hazard. E. Bad luck.
C. Risk.
33. An unanticipated event that occurs which is beneficial to a project is known as a(n) A. Management Reserve. B. Success Factor. C. Unscheduled Activity. D. Positive Risk.
C. Unscheduled Activity.
18. The risk assessment form contains all of the following EXCEPT A. Likelihood of the risk event occurring. B. Potential impact of the risk event. C. Who will detect the occurrence of the risk event. D. Difficulty of detecting the occurrence of the risk event. E. When the risk event may occur.
C. Who will detect the occurrence of the risk event.
97. What is Change Control Management and what function does it perform?
Change Control Management is the formal process for making and tracking changes once a project has started. Any changes must be detailed and accepted by the project team. Risks associated with making changes are thus assessed and documented.
63. _____________ systems involve reporting, controlling, and recording changes to the project baseline.
Change management
45. The significance of a risk is assessed in terms of the ________ and the impact of the event.
likelihood
41. Most changes on a project are related to A. Scope Changes. B. Improvement Changes. C. Implementing Contingency Plans. D. All of these choices are correct.
D. All of these choices are correct.
30. Which of the following is NOT involved in risk control? A. Executing the risk response strategy B. Initiating contingency plans C. Establishing a change control system D. Establishing contingency funds E. Watching for new risks
D. Establishing contingency funds
7. One common mistake made early in the risk identification process is to A. Not consider all possibilities. B. Encourage participants be over optimistic. C. Support participants being over pessimistic. D. Focus on consequences and not on the events that could produce consequences. E. Give too much attention to past events.
D. Focus on consequences and not on the events that could produce consequences.
5. Which of the following is NOT one of the steps in the risk management process? A. Risk response development B. Risk assessment C. Risk identification D. Risk tracking E. Risk response control
D. Risk tracking
39. Including the change control system within the ________ is a key to a successful project. A. Work Breakdown Structure B. Project Baseline C. Risk Management Plan D. Work Breakdown Structure and Project Baseline
D. Work Breakdown Structure and Project Baseline
51. When considering risk response development, reducing the likelihood that an event will occur and/or reducing the impact that an adverse event would have on a project is known as _________ the risk.
mitigating
55. Testing a new project on a smaller isolated area prior to installing it for the entire organization is an example of ________ a risk.
mitigating
58. Flooding would be devastating to the project; however, it is very unlikely. The project manager is most likely to __________ this risk.
retain
54. When considering risk response development, assuming the risk because the chance of such an event is slim is known as _________ the risk.
retaining
32. Change management systems are designed to accomplish all of the following EXCEPT A. Track all changes that are to be implemented. B. Review, evaluate, and approve/disapprove proposed changes formally. C. Identify expected effects of proposed changes on schedule and budget. D. Reflect scope changes in baseline and performance measures. E. All of these are examples of what change management systems are designed to accomplish.
E. All of these are examples of what change management systems are designed to accomplish.
9. Which of the following groups should NOT be a part of the risk identification process? A. Project team B. Customers C. Subcontractors D. Vendors E. All of these groups can be included in the risk identification process.
E. All of these groups can be included in the risk identification process.
20. Adopting proven technology instead of experimental technology in order to eliminate technical failure would be an example of which risk response? A. Mitigating B. Retaining C. Ignoring D. Transferring E. Avoiding
E. Avoiding
19. Risks are evaluated in terms of A. Likelihood and cost. B. Cost and schedule. C. Impact and cost. D. Time and impact. E. Likelihood and impact.
E. Likelihood and impact.
17. The risk management tool that is divided into three color-coded zones representing major, moderate, and minor risks is the risk A. Assessment form. B. Responsibility matrix. C. Scenario assessment. D. Impact assessment. E. Severity matrix.
E. Severity matrix.
2. The chances of a risk event occurring as a project proceeds through its life cycle tend to A. Slowly rise. B. Drop sharply and then level out. C. Rise sharply and then level out. D. Remain about the same. E. Slowly drop.
E. Slowly drop.
25. A Risk Response Matrix contains all of the following EXCEPT A. Contingency plan. B. Trigger. C. Who is responsible. D. Response. E. When the risk will occur.
E. When the risk will occur.
21. Which of the following activities might you consider adding a time buffer to? A. Activities with severe risks B. Merge activities that are prone to delays C. Activities with scarce resources D. Noncritical activities with very little slack E. You might consider adding a time buffer to any of these activities.
E. You might consider adding a time buffer to any of these activities.
65. Risk events that occur in the early stages of a project will have a greater cost impact than those that occur in later stages.
FALSE
66. Risk management is a reactive approach that is designed to ensure that surprises are reduced and that negative consequences associated with undesirable events are minimized.
FALSE
68. The project being delayed is an example of a major risk that should be assessed.
FALSE
69. The first step in the risk management process is risk assessment.
FALSE
71. The risk identification process should be limited to just the core project team.
FALSE
73. Responses to all identifiable risks should be a top priority for the project manager.
FALSE
74. When considering risk value, the lower the value, the higher the level of risk.
FALSE
75. If, during risk response development, you successfully identify how you will respond to a risk, contingency planning is unnecessary.
FALSE
76. Adopting proven technology instead of experimental technology is an example of mitigating a risk.
FALSE
78. Performance bonds, warranties, and guarantees are financial instruments used to share risk.
FALSE
80. When developing a response to a risk by scheduling outdoor work in the summer, investing in up-front safety training, or choosing high-quality materials, these are examples of retaining a risk.
FALSE
83. Enhancing a risk is a tactic that seeks to eliminate the uncertainty associated with an opportunity to ensure that it definitely happens.
FALSE
86. Opportunities identified within a project are treated very differently from risks.
FALSE
88. Describe the relationship between the likelihood of a risk event occurring and the cost of fixing the risk event as a project proceeds through its life cycle.
In the early stages of the project life cycle the probability of a risk event occurring is greater than at any other time and the cost to fix it is lower than at any other point. As time passes the probability of occurrence drops lower and lower while the cost rises.
92. Why might an organization be opposed to developing and implementing a thorough risk management process?
Managing risk takes time and money, which may deter organizations from implementing a management process. Organizational culture may also play a role in how much an organization values risk management.
64. The probability that a risk event will occur is higher during the initial stages of a project.
TRUE
67. One common mistake that is made early on in the risk identification process is to focus on consequences and not on the events that could produce consequences.
TRUE
70. A risk profile is a list of questions that have been developed and refined from previous, similar projects.
TRUE
72. While a "can do" attitude is essential during implementation, project managers have to encourage critical thinking when it comes to risk identification.
TRUE
77. A risk is an uncertain event that, if it occurs, can have a positive or negative effect on project objectives.
TRUE
79. Fixed-price contracts are an example of transferring risk from an owner to a contractor.
TRUE
81. Budget reserves are set up to cover identified risks associated with specific segments of a project while management reserves are set up to cover unidentified risks associated with the total project.
TRUE
82. Change management systems involve reporting, controlling, and recording changes to the project baseline.
TRUE
84. Contingency funding is made up of budget reserves and management reserves.
TRUE
85. Although most risks are presented as something not desirable, there can also be desirable risks called Opportunities.
TRUE
87. Having an environment where identified risks are treated professionally will lead to better control of risks.
TRUE
90. What is the difference between mitigating a risk and a contingency plan? Provide real life examples that illustrate the difference.
The key distinction between a risk response or, for example, mitigating a risk, and a contingency plan is that a response is part of the actual implementation plan and action is taken before the risk can materialize, while a contingency plan is not part of the initial implementation plan and goes into effect only after the risk is recognized.
62. A ____________ is an alternative that will be used if a possible foreseen risk event becomes a reality.
contingency plan
98. When considering risk management, what is an opportunity? List and briefly describe 4 different responses to an opportunity.
An opportunity is an event that can have a positive impact on project objectives. One can exploit an opportunity or seek to eliminate the uncertainty associated with it, share an opportunity or allocate some ownership of an opportunity to another party who is best capable of capturing it, enhance the opportunity or increase the probability and/or positive impact of an opportunity, or accept the opportunity by taking advantage of it if it occurs, but not pursue it.
46. A list of questions that address traditional areas of uncertainty on a project is known as a _________.
risk profile
49. The ________ matrix is divided into red, yellow, and green zones representing major, moderate, and minor risks.
risk severity
50. According to the Failure Mode and Effects Analysis (FMEA), Impact x Probability x Detection = __________.
risk value
53. When considering risk response development, passing risk to another party instead of changing it is known as ____________ the risk.
transferring
56. Performance bonds, warranties, and insurance are examples of ________ a risk.
transferring
59. The event or point in time when a contingency plan will be implemented is called a _________.
trigger
37. This response is used when an identified Opportunity is not actively pursued. A. Exploit B. Share C. Enhance D. Accept
D. Accept
16. Purchasing an accident insurance policy would be an example of responding to a risk by _____________ it. A. Mitigating B. Retaining C. Ignoring D. Transferring E. Avoiding
D. Transferring
22. Which of the following is NOT included in a Failure Mode and Effects Analysis? A. Impact B. Probability C. Detection D. Risk value E. All of these are included.
E. All of these are included.
95. Identify and briefly describe the four ways to respond to identified risks.
(1) Mitigate the risk-involves reducing the likelihood that the event will occur and/or reducing the impact that the adverse event would have on the project; (2) Avoid the risk-changing the project plan to eliminate the risk; (3) Transfer the risk-passing a risk to another party; (4) Retain the risk-making a conscious decision to accept the risk of an event occurring.
89. Identify and briefly describe the four steps in the risk management process.
(1) Risk Identification-all possible risks are identified; (2) Risk Assessment-risks are assessed in terms of importance and need for attention; (3) Risk Response Development-plans are developed to respond if the risk actually occurs; (4) Risk Response Control-the actual response to the risk and controlling changes associated with the risks.
61. ________ reserves are controlled by the project manager and the owner of the project and are used to cover major unforeseen risks to the entire project.
Management
93. Give a real life example of mitigating a risk, avoiding a risk, transferring a risk and retaining a risk.
Mitigating a risk: duplicate systems, backup systems, alternate technology development. Avoiding a risk: moving a concert indoors to avoid potential negative weather conditions. Transferring risk: fixed-price contract, insurance. Retaining risk: accept the risk of a lighting strike because the likelihood is so low.
52. When considering risk response development, changing the plan to eliminate the risk or condition is known as ____________ the risk.
avoiding
57. Choosing to move a concert indoors to eliminate the threat of bad weather is an example of ____________ a risk.
avoiding
42. An uncertain event or condition that, if it occurs, has a positive or negative effect on project objectives is known as a __________.
risk
48. The ________ form identifies each risk event, the likelihood of it occurring, the potential impact, when it may occur, and the degree of difficulty in detecting it.
risk assessment
44. The first step in the risk management process is ________.
risk identification
94. What is a "trigger" and why is it important when planning contingencies?
A trigger is an event or point in time when the contingency plan will be implemented. It is not only important to know what you will do if a risk event actually occurs but at what point will it be implemented. This discourages implementing the plan too soon or waiting too long and potentially increasing the negative impact of the risk.
26. A key distinction between a risk response and a contingency plan is A. A risk response is established only for moderate risks while contingency plans are established for major risks. B. A risk response is part of the actual implementation plan and action is taken before the risk can materialize, while a contingency plan goes into effect only after the risk has transpired. C. A risk response is only effective when you are able to assess the likelihood of the risk and its impact on the project; all other risks are covered by contingency planning. D. A risk response is created by the project team and the project manager while the project manager and the customer agree on the contingency plan. E. A risk response is action that is the response to a risk once it has happened and the contingency plan is created by the customer if the risk response fails.
B. A risk response is part of the actual implementation plan and action is taken before the risk can materialize, while a contingency plan goes into effect only after the risk has transpired.
10. After your team has successfully identified potential risks that could affect the project, what is the next step? A. Create a risk breakdown structure B. Assess identified risks C. Create contingency plans D. Decide how to respond to all risks E. Mitigate risks
B. Assess identified risks
28. Funds that are for identified risks that have a low probability of occurring and that decrease as the project progresses are called ______ reserves. A. Management B. Budget C. Contingency D. Padded E. Just in case
B. Budget
14. Based on the following, which event should you be most concerned about? Risk Event Likelihood Impact Bad weather 2 3 Design flaw 3 5 Accident 1 5 Shipment delay 2 2 Power outage 1 5 A. Bad weather B. Design flaw C. Accident D. Shipment delay E. Power outage
B. Design flaw
38. A ____________ (responsible for the work package) involved in risk assessment and mitigation will help focus attention on all aspects of risk management. A. Project Manager B. Line Person C. Stakeholder D. All of these choices are correct.
B. Line Person
31. Which of the following is identified to cover major unforeseen risks and, hence, are applied to the total project? A. Project reserves B. Management reserves C. Time buffers D. Activity reserves E. Budget reserves
B. Management reserves
12. _______________ focuses on how to respond to events that have a positive impact on a project. A. Risk management B. Opportunity management C. Value management D. Contingency management E. Prospect management
B. Opportunity management
27. The risk associated with the unlikelihood that one of the key members will be struck by lightning would most likely be handled by which of the following? A. Mitigating B. Retaining C. Ignoring D. Transferring E. Avoiding
B. Retaining
4. The attempt to recognize and manage potential and unforeseen trouble spots that may occur when a project is implemented is known as A. Risk forecasting. B. Risk management. C. Contingency planning. D. Scenario analysis. E. Disaster protection.
B. Risk management.
35. This response allocates some or all of the responsibility of realizing the identified Opportunity for the project. A. Exploit B. Share C. Enhance D. Accept
B. Share
23. A fixed price contract is an example of A. Avoiding risk. B. Transferring risk. C. Accepting risk. D. Ignoring risk. E. Mitigating risk.
B. Transferring risk.
91. What is the purpose of using tools such as a risk assessment form and a risk severity matrix?
These tools are used to assess risk. After risk identification there are many risks that are trivial and can be ignored. The risk assessment form and risk severity matrix help assess the probability of the event occurring and the impact of the event on the project. After assessment, responses are developed only for risks that pose serious threats to the welfare of the project.
43. The likelihood of a risk event occurring ________ as a project goes through its life cycle.
decreases
47. The measurement of how easy it would be to detect that the event was going to occur in time to take mitigating action is known as __________.
detection difficulty
