CAPM Chapte 11
TECOP
Technical, Environmental Commercial, Operational and Political
Expected Monetary Value (EMV)
The monetary value of a risk exposure based on the risk's probability and impact in the risk matrix. This approach is typically used in quantitative risk analysis because it quantifies the risk exposure.
Non-Linear Scaling
.05, .10
You have been asked to establish an estimated project cost using Expected Monetary Value (EMV). If the project has a best case estimate of $7,500 with a probability of 20%, a most likely case estimate of $9,150 with a probability of 55%, and a worst case estimate of $11,529 with a probability of 25% what is the EMV for the project?
9415 The formula to get the correct answer is: ($7,500 * 20%) + ($9,150 * 55%) + ($11,529 * 25%) = $9,415
Risk Register
A document in which the results of risk analysis and risk response planning are recorded. An excel spreadsheet.
18. Which of the following is not a factor in the assessment of project risk? A. Transference costs B. Risk probability C. Value at stake D. Risk event
Answer A. "Transference costs" is a fancy way of saying insurance premiums. These do not come into play until you are evaluating the risk responses.
13. You are acting as the portfolio manager and must select a project to execute from a pool of three choices. Each of the choices has an expected payout of $20,000 and an equal 75% chance of succeeding. In this situation what does $15,000 represent? A. Net present value B. Risk value C. Expected monetary value D. Simple interest
Answer C. The expected monetary value is calculated by multiplying the probability times the impact of any event.
risk
Degree of uncertainty of return on an asset; in business, the likelihood of loss or reduced profit.
Process two: Identify Project Risk
In the planning process group
You have just determined that you need to transfer a risk. In which of the following risk management processes are you?
Plan risk responses Be careful here. The question states you have just determined that you NEED to transfer a risk. This is done in the plan risk response process.
PESTLE analysis
Political, Economic, Social, Technological, Legal, Environmental
Which of the following is NOT a tool or technique used in the identify risks process?
Risk categorization Answer C. PMBOK® Guide p. 396 - The tools and techniques of the identify risks process include: Expert judgment Data gathering Data analysis Interpersonal and team skills Prompt lists Meetings
Risk Tolerance
The degree of uncertainty that an investor can handle in regard to a negative change in the value of his or her portfolio.
Plan Risk Management
The process of defining how to conduct risk management activities for a project.
Influence Diagrams Use in Identify Risks
These are graphical representations of situations showing causal influences, time ordering of events, and other relationships among variables and outcomes
Prompt Lists
a pre determined list of risk categories, providing the team with a head-start on the process of brainstorming.
Integrated risk management
a risk treatment technique that combines coverage for pure and speculative risks in the same contract
Sensitivity Analysis
a special case of what-if analysis, is the study of the impact on other variables when one variable is changed repeatedly
Risk Management
a strategy to offset business risks
green zone/red zone
est org guidelines for positive performance. Take responsibility for circumstances of their life and welcome feedback. A safe space.
round robin brainstorming
go around the room
To calculate EVM:
multiple the estimated cost by the probability (150,000 x .20=30,000. Do this fall all possible outcomes, and add them up. The sum is the EVM. Remember to convert the percent to a decimal (20% to .20).
free for all brainstorming
shout out ideas, talk over each other. most common technique. No rules or constructs
Linear
straight line 1,3.5.7.9
SWOT analysis
strengths, weaknesses opportunities and threats of a topic. All on a white board or sticky notes. Fill in the blanks.
Risk Urgency
• Risks requiring near-term responses may be considered more urgent to address. • Indicators of priority can include time to affect a risk response, symptoms and warning signs, and the risk rating. • In some qualitative analyses the assessment of risk urgency can be combined with the risk ranking determined from the probability and impact matrix to give a final risk severity rating
23. Which of the following risk strategies is represented by insurance? A. Avoidance B. Acceptance C. Transfer D. Mitigation
. Answer C. Insurance is the most common type of risk transfer. It is making the risk someone else's problem.
1. Which of the following is an input to the identify risks process? A. Project management plan B. SWOT analysis C. Risk related contracts D. Technical performance measurements
1. Answer A. PMBOK® Guide p. 396 - The inputs to the identify risks process includes: Project management plan Project documents Agreements Procurement documentation Enterprise environmental factors Organizational process assets
You have been asked to establish an estimated project cost using Expected Monetary Value (EMV). If the project has a best case estimate of $15,000 with a probability of 30%, a most likely case estimate of $19,500 with a probability of 50%, and a worst case estimate of $26,325 with a probability of 20% what is the EMV for the project?
19515 The formula to get the correct answer is: ($25,000 * 22%) + ($31,250 * 53%) + ($40,625 * 25%) = $19,515
You have been asked to establish an estimated project cost using Expected Monetary Value (EMV). If the project has a best case estimate of $20,000 with a probability of 10%, a most likely case estimate of $23,200 with a probability of 65%, and a worst case estimate of $32,480 with a probability of 25% what is the EMV for the project?
25200 The formula to get the correct answer is: ($20,000 * 10%) + ($23,200 * 65%) + ($32,480 * 25%) = $25,200
You have been asked to select one of four projects for your organization to execute. The organization is very risk adverse. If you assume the ends of a range of estimates are +/- 3 sigma from the mean, which of the following range estimates involves the least risk?
26 days plus or minus 5 days. This question is actually much easier than it first appears. Because we are assuming a range of estimates that is +/- 3 sigma, meaning it is a normal distribution, all you have to do is determine which range estimate has the smallest difference or variance. The 3 point estimate has a range of 11 days. The plus or minus 5 days is a range of 10 and 20-33 days is 13.
You have been asked to establish an estimated project cost using Expected Monetary Value (EMV). If the project has a best case estimate of $30,000 with a probability of 24%, a most likely case estimate of $34,500 with a probability of 56%, and a worst case estimate of $45,540 with a probability of 20% what is the EMV for the project?
35628 The formula to get the correct answer is: ($30,000 * 24%) + ($34,500 * 56%) + ($45,540 * 20%) = $35,628
You have been asked to establish an estimated project cost using Expected Monetary Value (EMV). If the project has a best case estimate of $50,000 with a probability of 25%, a most likely case estimate of $55,000 with a probability of 45%, and a worst case estimate of $68,750 with a probability of 30% what is the EMV for the project?
57875 The formula to get the correct answer is:($50,000 * 25%) + ($55,000 * 45%) + ($68,750 * 30%) = $57,875
Probability and Impact Matrix
A grid for mapping the probability of each risk occurrence and its impact on project objectives if that risk occurs. Qualitative. Get the risk in a list order.
Decision Tree Analysis ( p 372 pdf)
A type of analysis that determines which of two decisions is the best. The decision tree assists in calculating the value of the decision and determining which decision costs the least.
Variability risks
A type of risk based on the variations that may occur in the project, such as production, number of quality errors, or even the weather.
Risk Matrix
A matrix that lists an organization's vulnerabilities, with ratings that assess each one in terms of likelihood and impact on business operations, reputation, and other areas.
dormancy of a risk
A period of time that may elapse after a risk has occurred before its impact is discovered. A short period indicates low dormancy.
Monte Carlo Simulation
A process which generates hundreds or thousands of probable performance outcomes based on probability distributions for cost and schedule on individual tasks. The outcomes are then used to generate a probability distribution for the project as a whole.
Which of the following is NOT an input to the perform quantitative risk analysis process?
Agreements Answer B. PMBOK® Guide p. 396 - The inputs to the perform quantitative risk analysis process include: Risk management plan Cost management plan Schedule Management Plan Risk register Enterprise environmental factors Organizational process assets
qualitative risk analysts
Always comes first. Prioritizing the identified risks for further action. Rank order them biggest to little.
VUCA
An acronym for volatile, uncertain, complex, and ambiguous that captures the context in which today's organizations compete.
14. You are leading a large complex project within your organization that is forecast to continue for ten more months. The project has an 18% chance of being impacted in a given month by a particular risk. What is the probability that the project will be impacted by the risk in the 3rd month? A. 18% B. 36% C. 54% D. 72%
Answer A. Many people miss this question. Remember, each month in the scenario is independent. So if the probability is 18% in one month and the probability is equal, it is 18% in all months.
9. Which of the following is NOT an tool and technique to the monitor risks process? A. Risk urgency assessment B. Risk audits C. Status meetings D. Technical performance measurement
Answer A. PMBOK® Guide p. 396 - The tools and techniques used in the monitor risks process include: Data analysis Audits Meetings
5. Which of the following is NOT a tool or technique used in the perform quantitative risk analysis process? A. Prompt lists B. Representations of uncertainty C. Interpersonal and team skills D. Expert judgment
Answer A. PMBOK® Guide p. 396 - The tools and techniques used in the perform quantitative risk analysis process include: Expert judgment Data gathering Interpersonal and team skills Representations of uncertainty Data analysis
6. Which of the following is a tool or technique used in the perform quantitative risk analysis process? A. Representations of uncertainty B. Risk categorization C. Meetings D. Project management information system
Answer A. PMBOK® Guide p. 396 - The tools and techniques used in the perform quantitative risk analysis process include: Expert judgment Data gathering Interpersonal and team skills Representations of uncertainty Data analysis
28. You are in the process of quantifying risks on a project you are leading. Several of your key resources are non-collocated and have needed input. How can this be done? A. Make use of the Delphi technique. B. Make use of Monte Carlo analysis. C. Make use collaboration software. D. Apply critical chain modeling.
Answer A. The Delphi Technique is specifically designed to survey your experts, aggregate their responses and then feed the aggregated result back to them for confirmation. This is the best option in a situation where the resources are not all together.
30. You are the project manager on a large IT project. You have assembled your team, identified the major risks on the project, determined what would trigger those risks, rated the risks on a rating matrix, tested the major risk assumptions, and assessed the quality of the data used. The team is continuing to move through the risk management process. What have you forgotten to do? A. Involve other stakeholders. B. Use a Monte Carlo simulation. C. Mitigate the risks. D. The overall risk ranking for the project.
Answer A. There is nothing wrong with this process. It simply needs to be continued. The best answer in this case is to involve other stakeholders.
19. You take over a project from a previous project manager. As part of the turn over process they hand you a risk watch list. What should be done with the risks on the watch list? A. Add the information to your takeover report. B. Add them to the lessons learned for future projects. C. Read over the watch list as they are already covered in the properly completed contingency plans. D. Read over the watch list then revisit during monitoring and controlling.
Answer B. A good project manager is constantly monitoring the identified risks on a project. In this question you do not know where the watch list came from.
26. You have just determined that you need to transfer a risk. In which of the following risk management processes are you? A. Identify risks B. Plan risk responses C. Monitor and control risks D. Perform quantitative risk analysis
Answer B. Be careful here. The question states you have just determined that you NEED to transfer a risk. This is done in the plan risk response process.
22. Which of the following is not a common result of risk management? A. The communications management plan is changed. B. The project charter is changed. C. The schedule management plan is changed. D. The project management plan is changed.
Answer B. Of the choices the project charter is the least likely to be changed because of the risk management process. Remember, the charter authorizes the project.
15. You are acting as an outside project management expert consultant for a struggling project. The project is important to the chief executive officer who is concerned the project is not going to hit its schedule date. Which of the following is most likely to impact achieving the schedule target? A. Significant increases in component costs. B. Delays in obtaining required sponsor approvals. C. Date slippages as stakeholders fail to attend sprint reviews. D. Disputes with contractors over increase costs.
Answer B. Only delays in obtaining sponsor approvals are guaranteed to cause delays. The other alternatives might cause a delay (except the post-implementation review meeting).
12. Which of the following is a tool or technique used in the implement risk responses process? A. Data gathering and representation techniques B. Project management information systems C. Risk data quality assessment D. Planning meetings and analysis
Answer B. PMBOK® Guide - The tools and techniques used in the implement risk responses process include: Expert judgment Interpersonal and team skills Project management information system
4. Which of the following is NOT an input to the perform quantitative risk analysis process? A. Organizational process assets B. Agreements C. Project management plan D. Project documents
Answer B. PMBOK® Guide p. 396 - The inputs to the perform quantitative risk analysis process include: Risk management plan Cost management plan Schedule Management Plan Risk register Enterprise environmental factors Organizational process assets
10. Which of the following is a tool or technique used in the monitor risks process? A. audits B. Interpersonal and team skills C. Expert judgment D. Decision making
Answer B. PMBOK® Guide p. 396 - The tools and techniques used in the monitor risks process include: Data analysis Audits Meetings
24. It is your first day at a new job and you are asked to evaluate the risks on a large project managed by the PMO. Unfortunately, you cannot evaluate the exact cost impacts of the risks you are analyzing. Based on this situation you should evaluate the risks on a: A. Statistical basis B. Qualitative basis C. Quantitative basis D. Mathematical basis
Answer B. The question tells you that you cannot find the exact impacts. This excludes statistical, quantitative and mathematical basis of measure. You are left with qualitative such as high, medium and low.
25. In which of the following risk management processes are you most likely to be required to find workarounds? A. Monitor risks B. Plan risk responses C. Identify risks D. Quantitative risk analysis
Answer B. The question tells you that you cannot find the exact impacts. This excludes statistical, quantitative and mathematical basis of measure. You are left with qualitative such as high, medium and low.
17. You have been asked to select one of four projects for your organization to execute. The organization is very risk adverse. If you assume the ends of a range of estimates are +/- 3 sigma from the mean, which of the following range estimates involves the least risk? A. Optimistic = 21 days, most likely 27 days, pessimistic = 32 days. B. 26 days plus or minus 5 days. C. 20 - 33 days. D. Mean of 26 days.
Answer B. This question is actually much easier than it first appears. Because we are assuming a range of estimates that is +/- 3 sigma, meaning it is a normal distribution, all you have to do is determine which range estimate has the smallest difference or variance. The 3 point estimate has a range of 11 days. The plus or minus 5 days is a range of 10 and 20-33 days is 13.
20. Which of the following is not always an input to the risk management process? A. Work breakdown structure B. Lessons learned C. Project status reports D. Historical information
Answer C. Although project status reports can be a vital input to the risk management process, they are usually not available during the risk planning process and are therefore not always an input to the risk management process
27. You are acting as the project manager for a large project $1,500,000 within your organization. You have just finished the risk response plan for your project. Which of the following should you probably do next? A. Begin a project risk reassessment. B. Begin to analyze the risks that appear in major project documents. C. Complete the work breakdown structure. D. Determine the overall risk rating for the project.
Answer C. Finishing the risk response plan is done in the planning process group. The only of the options that is also in the planning process group is the completion of the work breakdown structure
2. Which of the following is NOT a tool or technique used in the identify risks process? A. Data gathering B. Data analysis C. Risk categorization D. Prompt list
Answer C. PMBOK® Guide p. 396 - The tools and techniques of the identify risks process include: Expert judgment Data gathering Data analysis Interpersonal and team skills Prompt lists Meetings
11. Which of the following is NOT a tool or technique used in the implement risk responses process? A. Expert judgment B. Interpersonal and team skills C. Technical performance measurements D. Project management information system
Answer C. PMBOK® Guide p. 396 - The tools and techniques used in the implement risk responses process include: Expert judgment Interpersonal and team skills Project management information system
7. Which of the following is a tool or technique used in the plan risk responses process? A. Risk response analysis B. Risk response planning C. Contingent response strategies D. Strategic risk response planning
Answer C. PMBOK® Guide p. 396 - The tools and techniques used in the plan risk responses process include: Expert judgment Data gathering Interpersonal and team skills Strategies for negative risks or threats Strategies for positive risks or opportunities Contingent response strategies Strategies for overall project risks Data analysis Decision making
21. It is very important that the project manager determine risk tolerances in order to help: A. The sponsor understand how the resource managers will act. B. Schedule the project. C. Rank the project risks. D. Estimate the project duration.
Answer C. Risk tolerances, or how much risk various stakeholders are willing to accept. This is a critical piece of information used to rank the project risks.
3. Which of the following is a tool or technique used in the perform qualitative risk analysis process? A. Risk response analysis B. Risk prioritization C. Project management information system D. Risk categorization
Answer D. PMBOK® Guide p. 396 - The tools and techniques used in the perform qualitative risk analysis include: Expert judgment Data gathering Data analysis Interpersonal and team skills Risk categorization Data representation Meetings
8. Which of the following is NOT a tool or technique used in the plan risk response process? A. Strategies for negative risks or threats B. Strategies for positive risks or opportunities C. Expert judgment D. Contingency reserve analysis
Answer D. PMBOK® Guide p. 396 - The tools and techniques used in the plan risk responses process include: Expert judgment Data gathering Interpersonal and team skills Strategies for negative risks or threats Strategies for positive risks or opportunities Contingent response strategies Strategies for overall project risks Data analysis Decision making
29. During the plan risk management process the project team you are leading discovers 387 risks and 32 major causes of those risks. The project is part of a major program within the organization and must be completed. Your team is very experienced and has worked together for several years. You have also worked with the sponsor for several years as well, and they are very supportive of your efforts. Significant time has been spent to ensure the project scope and WBS is complete and it has been signed off by all the key stakeholders. Unfortunately, your team has not been able to determine an effective way to mitigate or insure against the one of those major risks. It is something that must be done by the internal team and cannot be outsourced. It also cannot be deleted from the project. What would be the best solution? A. Determine a way to transfer the risk B. Determine a way to avoid the risk C. Continue to investigate ways to mitigate the risk D. Accept the risk
Answer D. There are two important aspects to this question. Firstly, did you notice that everything but the last four sentences is unnecessary? Secondly, this question really reflects the real world. The question excludes everything but acceptance. Sometimes in the real world all you can do is accept a risk.
16. You have been asked to select one of four projects for your organization to execute. The organization is very risk adverse. If you assume the ends of a range of estimates are +/- 3 sigma from the mean, which of the following range estimates involves the least risk? Chapter 11 — Risk Management CAPM Exam Preparation Student Guide v.10.0 ©2018 Looking Glass Development Page 388 A. Mean of 33 days. B. 40 days plus or minus 8 days. C. 32 - 46 days. D. Optimistic = 33 days, most likely 40 days, pessimistic 46 days.
Answer D. This question is actually much easier than it first appears. Because we are assuming a range of estimates that is +/- 3 sigma, meaning it is a normal distribution, all you have to do is determine which range estimate has the smallest difference or variance. The 3 point estimate has a range of 13, the 33-46 days is a range of 13, and 40 +/- 8 days is 16.
Quantitative Analysis Method
Estimates cost functions by using formal mathematic models to fit cost functions to past data observations. Learn the details of the risk and analyse the biggest ones.
Which of the following is a tool or technique used in the monitor risks process?
Qualitative basis The question tells you that you cannot find the exact impacts. This excludes statistical, quantitative and mathematical basis of measure. You are left with qualitative such as high, medium and low.
RBS Risk Break Down Structure
Risk Breakdown Structure A graphical, hierarchical decomposition used to facilitate understanding and organization. Breaking down the categories of risks -- not the actual risks, they won't be known yet -- we are breaking down the categories of risks that we will evaluate.
Ambiguity risks
Risks that have an uncertain, unclear nature, such as new laws or regulations, the marketplace conditions, and other risks that are nearly impossible to predict.
known risks
Risks that the project team has identified and analyzed and that can be managed proactively
manageability of a risk
The ease wit which the risk owner can manage the occurrence or impact of a risk. Where management is easy, manageability is high.
Risk Detection
The ease with which the results of the risk occurring, can be detected and recognized. Where easily detected, detecaability is high.
Risk Proximity
The time between an event and the consequent impact which determines how long an organization has to respond to avoid damage.
relative scale (scale of analysis)
The way in which areas of the world are grouped together for study. Very low, low, medium high, very high.
Delphi tecnique
survey the SME, have the expert consolidate the responses to a consensus opinion.
Quiet Writing
team member share ideas on paper--advantage, limits peer influence on ideas
Unknown risks can be managed proactively.
unknown, unknowns--like acts of God--tornado