CHAPTER 7

E. Avoiding Although it is impossible to eliminate all risk events, some specific risks may be avoided before you launch the project. Adopting proven technology instead of experimental technology in order to eliminate technical failure would be an example of avoiding risk.

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

B. Assess identified risks After risks have been identified, not all of them deserve attention. Managers have to develop methods for sifting through the list of risks, eliminating inconsequential or redundant ones and stratifying worthy ones in terms of importance and need for attention. This is risk assessment.

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. Design flaw

Based on the following, which event should you be most concerned about? A. Bad weather B. Design flaw C. Accident D. Shipment delay E. Power outage

E. All of these are examples of what change management systems are designed to accomplish. Most change management systems are designed to identify proposed changes, list expected effects of proposed changes on schedule and budget, review, evaluate and approve or disapprove changes formally, negotiate and resolve conflicts of change, conditions and cost, communicate changes to parties affected, assign responsibility for implementing changes, adjust master schedule and budget, and track all changes that are to be implemented.

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. When the risk will occur. A risk response matrix will contain the risk event, the immediate response to that event, the contingency plan if that event were to occur despite our efforts to mitigate, avoid, transfer, the trigger, and who is responsible for putting that contingency plan into motion

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.

B. Transferring risk. Fixed price contracts are the classic example of transferring risk from an owner to a contractor

A fixed price contract is an example of A. Avoiding risk. B. Transferring risk. C. Accepting risk. D. Ignoring risk. E. Mitigating risk.

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.

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.

A. Risk profile. A risk profile is a list of questions that address traditional areas of uncertainty on a project. These questions have been developed and refined from previous, similar projects.

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.

C. Risk.

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. Assess risks.

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.

E. Likelihood and impact.

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.

A. Technical risks. Technical risks are problematic; they can often be the kind that cause the project to be shut down.

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.

B. Budget Budget reserves are set up to cover identified risks; these reserves are those allocated to specific segments or deliverables of the project.

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

D. Focus on consequences and not on the events that could produce consequences

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

A. Risk breakdown structures Organizations use risk breakdown structures in conjunction with work breakdown structures to help management teams identify and eventually analyze risk. The focus at the beginning should be on risks that can affect the whole project as opposed to a specific section of the project or network.

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

D. Transferring

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

B. Risk management.

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.

E. Slowly drop.

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.

A. Slowly rise.

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.

C. Identify the risks.

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. Who will detect the occurrence of the risk event. In addition to evaluating the severity and probability of risk events the team also assesses when the event might occur and its detection difficulty.

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.

B. Retaining The risk of a project manager being struck by lightning at a work site would have major negative impact on the project, but the likelihood is so low it is not worthy of consideration. Conversely, people do change jobs, so an event like the loss of key project personnel would have not only an adverse impact but also a high likelihood of occurring in some organizations. If so, then it would be wise for that organization to be proactive and mitigate this risk by developing incentive schemes for retaining specialists and/or engaging in cross-training to reduce the impact of turnover.

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

E. Severity matrix. The risk severity matrix provides a basis for prioritizing which risks to address. Red zone risks receive first priority followed by yellow zone risks. Green zone risks are typically considered inconsequential and ignored unless their status changes.

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. You might consider adding a time buffer to any of these activities Just as contingency funds are established to absorb unplanned costs, managers use time buffers to cushion against potential delays in the project. And like contingency funds, the amount of time is dependent upon the inherent uncertainty of the project. You might consider adding a time buffer to any of these activities

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. All of these groups can be included in the risk identification process

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 are included Failure Mode and Effects Analysis (FMEA) extends the risk severity matrix by including ease of detection in the equation: Impact x Probability x Detection = Risk Value.

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

D. Establishing contingency funds Risk control involves executing the risk response strategy, monitoring triggering events, initiating contingency plans, and watching for new risks. Establishing a change management system to deal with events that require formal changes in the scope, budget, and/or schedule of the project is an essential element of risk control.

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

C. Ignoring

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

D. Risk tracking The four steps in the risk management process are risk identification, risk assessment, risk response development and risk response control.

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

B. Management reserves Management reserve funds are needed to cover major unforeseen risks and, hence, are applied to the total project.

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

A. Detection difficulty

_____________ 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

B. Opportunity management

_______________ 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