Information Systems Project Mgmt - Chapter 11 Quiz

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

Residual

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

Risk utility

_____ helps professionals to see the effects of changing one or more variables on an outcome.

Sensitivity analysis

Explain decision trees and expected monetary value.

A decision tree is a diagramming analysis technique used to help select the best course of action in situations in which future outcomes are uncertain. A common application of decision tree analysis involves calculating expected monetary value. Expected monetary value (EMV) is the product of a risk event probability and the risk event's monetary value. To create a decision tree, and to calculate expected monetary value specifically, you must estimate the probabilities, or chances, of certain events occurring. Probabilities are normally determined based on expert judgment. To calculate the expected monetary value (EMV) for each project, multiply the probability by the outcome value for each potential outcome for each project and sum the results. Because the EMV provides an estimate for the total dollar value of a decision, you want to have a positive number; the higher the EMV, the better. Using EMV helps account for all possible outcomes and their probabilities of occurrence, thereby reducing the tendency to pursue overly aggressive or conservative risk strategies.

_____ is a technique by which a group attempts to generate ideas or find a solution for a specific problem by amassing ideas spontaneously and without judgment.

Brainstorming

List and briefly describe four methods for identifying risks.

Brainstorming is a technique by which a group attempts to generate ideas or find a solution for a specific problem by amassing ideas spontaneously and without judgment. This approach can help the group create a comprehensive list of risks to address later in the qualitative and quantitative risk analysis processes. An experienced facilitator should run the brainstorming session and introduce new categories of potential risks to keep the ideas flowing. After the ideas are collected, the facilitator can group and categorize the ideas to make them more manageable. Delphi technique: An approach to gathering information that helps prevent some of the negative group affects found in brainstorming is the Delphi Technique. The basic concept of the Delphi Technique is to derive a consensus among a panel of experts who make predictions about future developments. The Delphi Technique uses repeated rounds of questioning and written responses, including feedback to earlier-round responses, to take advantage of group input, while avoiding the biasing effects possible in oral panel deliberations. To use the Delphi Technique, you must select a panel of experts for the particular area in question. Interviewing: Interviewing is a fact-finding technique for collecting information in face-to-face, phone, e-mail, or instant-messaging discussions. Interviewing people with similar project experience is an important tool for identifying potential risks. Root cause analysis: It is not uncommon for people to identify problems or opportunities without really understanding them. Before suggesting courses of action, it is important to identify the root cause of a problem or opportunity. Root cause analysis often results in identifying even more potential risks for a project. SWOT analysis: Another technique is a SWOT analysis of strengths, weaknesses, opportunities, and threats, which is often used in strategic planning. SWOT analysis can also be used during risk identification by having project teams focus on the broad perspectives of potential risks for particular projects. Applying SWOT to specific potential projects can help identify the broad risks and opportunities that apply in that scenario. Three other techniques for risk identification include the use of checklists, analysis of assumptions, and creation of diagrams.

_____ 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 Contingency allowances

The basic concept of the _____ technique is to derive a consensus among a panel of experts who make predictions about future developments.

Delphi

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

EMV (Expected monetary value)

Brainstorming is a systematic, interactive forecasting procedure based on independent and anonymous input regarding future events.

False

Risk events refer to specific, certain events that may occur to the detriment or enhancement of the project.

False

The last step in project risk management is deciding how to address this knowledge area for a particular project by performing risk management planning.

False

The lower the earned monetary value calculation for a project, the chances of project success is higher.

False

List and briefly describe the six major processes involved in risk management.

Planning risk management involves deciding how to approach and plan the risk management activities for the project. By reviewing the project management plan, project charter, stakeholder register, enterprise environmental factors, and organizational process assets, project teams can discuss and analyze risk management activities for their particular projects. The main output of this process is a risk management plan. Identifying risks involves determining which risks are likely to affect a project and documenting the characteristics of each. The main output of this process is the start of a risk register. Performing qualitative risk analysis involves prioritizing risks based on their probability and impact of occurrence. After identifying risks, project teams can use various tools and techniques to rank risks and update information in the risk register. The main outputs are project documents updates. Performing quantitative risk analysis involves numerically estimating the effects of risks on project objectives. The main outputs of this process are project documents updates. Planning risk responses involves taking steps to enhance opportunities and reduce threats to meeting project objectives. Using outputs from the preceding risk management processes, project teams can develop risk response strategies that often result in updates to project management plan and other project documents. Controlling risk involves 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. The main outputs of this process include work performance information, change requests, and updates to the project management plan, other project documents, and organizational process assets.

_____ involves accepting the consequences should a risk occur.

Risk acceptance

_____ are indicators or symptoms of actual risk events.

Triggers

A probability/impact matrix or chart 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.

True

A risk-seeking person prefers outcomes that are more uncertain and is often willing to pay a penalty to take risks.

True

Identified risks may not materialize, or their probabilities of occurrence or loss may diminish.

True

Quantitative risk analysis need not be done for projects that are large and complex.

True

Risks can have both negative and positive effects on meeting project objectives.

True

The Delphi technique is a systematic, interactive forecasting procedure based on independent and anonymous input regarding future events.

True

The Microsoft Solution Framework (MSF) includes a risk management model that includes developing and monitoring a top-ten master list of risks.

True

The Monte Carlo analysis can predict the probability of finishing by a certain date or the probability that the cost will be equal to or less than a certain value.

True

The risk register can be created with a simple Microsoft Word or Excel file.

True

Contingency plans are predefined actions that the project team will take if an identified risk event occurs.

Truw

_____ involves determining which risks are likely to affect a project and documenting the characteristics of each. a. Identifying risks b. Planning risk management c. Performing qualitative risk analysis d. Performing quantitative risk analysis

a. Identifying risks

_____ are unplanned responses to risk events used when project teams do not have contingency plans in place. a. Workarounds b. Fallback plans c. Contingency plans d. Triggers

a. Workarounds Workarounds are unplanned responses to risk events used when project teams do not have contingency plans in place.

A(n) _____ is a diagramming analysis technique used to help select the best course of action in situations in which future outcomes are uncertain. a. decision tree b. activity-on-arrow c. workaround d. backward pass

a. decision tree

Identifying risks is a subprocess of the _____ process of project risk management. a. planning b. executing c. monitoring and controlling d. closing

a. planning

Performing qualitative and quantitative risk analyses are subprocesses of the _____ process of project risk management. a. planning b. executing c. monitoring and controlling d. closing

a. planning

Those who are _____ have a higher tolerance for risk, and their satisfaction increases when more payoff is at stake. a. risk-seeking b. risk-averse c. risk-neutral d. risk-indifferent

a. risk-seeking

A _____ is a technique used to show the effects of changing one or more variables on an outcome. a. sensitivity analysis b. decision tree c. Monte Carlo analysis d. systems analysis

a. sensitivity analysis

_____ involves deciding how to approach and plan the risk management activities for the project. a. Identifying risks b. Planning risk management c. Performing qualitative risk analysis d. Performing quantitative risk analysis

b. Planning risk management

_____ involves taking steps to enhance opportunities and reduce threats to meeting project objectives. a. Performing quantitative risk analysis b. Planning risk responses c. Controlling risk d. Performing qualitative risk analysis

b. Planning risk responses

_____ applies to positive risks when the project team cannot or chooses not to take any actions toward a risk. a. Risk enhancement b. Risk acceptance c. Risk sharing d. Risk exploitation

b. Risk acceptance Risk acceptance applies to positive risks when the project team cannot or chooses not to take any actions toward a risk.

_____ involves allocating ownership of the risk to another party. a. Risk exploitation b. Risk sharing c. Risk enhancement d. Risk acceptance

b. Risk sharing Risk sharing involves allocating ownership of the risk to another party.

A(n) _____ represents decision problems by displaying essential elements, including decisions, uncertainties, causality, and objectives, and how they influence each other. a. risk breakdown structure b. influence diagram c. process flow chart d. work breakdown structure

b. influence diagram

_____ involves 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. a. Performing quantitative risk analysis b. Planning risk responses c. Controlling risk d. Performing qualitative risk analysis

c. Controlling risk

_____ analysis simulates a model's outcome many times to provide a statistical distribution of the calculated results. a. Sensitivity b. Systems c. Monte Carlo d. NPV

c. Monte Carlo

_____ involves changing the size of the opportunity by identifying and maximizing key drivers of the positive risk. a. Risk exploitation b. Risk sharing c. Risk enhancement d. Risk acceptance

c. Risk enhancement Risk enhancement involves changing the size of the opportunity by identifying and maximizing key drivers of the positive risk.

_____ involves shifting the consequence of a risk and responsibility for its management to a third party. a. Risk avoidance b. Risk acceptance c. Risk transference d. Risk mitigation

c. Risk transference

The _____ lists the relative probability of a risk occurring and the relative impact of the risk occurring. a. Top Ten Risk Item Tracking chart b. requirements traceability matrix c. probability/impact matrix d. expectations management matrix

c. probability/impact matrix

Unenforceable conditions or contract clauses and adversarial relations are risk conditions associated with the project _____ management knowledge area. a. integration b. quality c. procurement d. human resources

c. procurement

_____ is a fact-finding technique that can be used for collecting information in face-to-face, phone, e-mail, or instant-messaging discussions. a. Brainstorming b. Monte Carlo analysis c. The Delphi technique d. Interviewing

d. Interviewing

_____ involves numerically estimating the effects of risks on project objectives. a. Performing qualitative risk analysis b. Planning risk responses c. Identifying risks d. Performing quantitative risk analysis

d. Performing quantitative risk analysis

_____ involves reducing the impact of a risk event by reducing the probability of its occurrence. a. Risk avoidance b. Risk acceptance c. Risk transference d. Risk mitigation

d. Risk mitigation Risk mitigation involves reducing the impact of a risk event by reducing the probability of its occurrence.

_____ risks refer to those that are direct results of implementing risk responses. a. Architectural b. Primary c. Residual d. Secondary

d. Secondary Secondary risks are a direct result of implementing a risk response.

_____ are/is a qualitative risk analysis tool that maintains an awareness of risks throughout the life of a project in addition to identifying risks. a. SharePoint portal b. Probability/impact matrices or charts c. Expectations management matrix d. Top Ten Risk Item Tracking

d. Top Ten Risk Item Tracking

A _____ person achieves a balance between risk and payoff. a. risk-seeking b. risk-averse c. risk-fearing d. risk-neutral

d. risk-neutral

Effective program managers recognize that managing a project is much more complex than managing a program.

false

The term _____ is used to describe risks that the project team has identified and analyzed.

known risks

Risk _____ refers to reducing the impact of a risk event by reducing the probability of its occurrence.

mitigation

Potential problems that might occur on the project and how they might impede project success are _____ risks.

negative

A project _____ is an uncertainty that can have a negative or positive effect on meeting project objectives.

risk

A(n) _____ is a hierarchy of potential risk categories for a project.

risk breakdown structure

A(n) _____ documents the procedures for managing risk throughout the project.

risk management plan

The _____ is the person who will own or take responsibility for the risk.

risk owner

A(n) _____ is a document that contains results of various risk management processes.

risk register

Risk utility rises at a decreasing rate for a(n) _____ person.

risk-averse

A(n) _____ is a list of risks that are low priority, but are still identified as potential risks.

watch list

Project teams sometimes use _____, which are unplanned responses to risk events, when they do not have contingency plans in place.

workarounds

What are the four basic response strategies for negative risks? Describe each strategy.

1. Risk avoidance or eliminating a specific threat, usually by eliminating its causes. Of course, not all risks can be eliminated, but specific risk events can be. For example, a project team may decide to continue using a specific piece of hardware or software on a project because they know it works. Other products that could be used on the project may be available, but if the project team is unfamiliar with them, they could cause significant risk. Using familiar hardware or software eliminates this risk. 2. Risk acceptance or accepting the consequences should a risk occur. For example, a project team planning a big project review meeting could take an active approach to risk by having a contingency or backup plan and contingency reserves if they cannot get approval for a specific site for the meeting. On the other hand, they could take a passive approach and accept whatever facility their organization provides. 3. Risk transference or shifting the consequence of a risk and responsibility for its management to a third party. For example, risk transference is often used in dealing with financial risk exposure. A project team may purchase special insurance or warranty protection for specific hardware needed for a project. If the hardware fails, the insurer must replace it within an agreed upon period of time. 4. Risk mitigation or reducing the impact of a risk event by reducing the probability of its occurrence. Suggestions for reducing common sources of risk on information technology projects were provided at the beginning of this chapter. Other examples of risk mitigation include using proven technology, having competent project personnel, using various analysis and validation techniques, and buying maintenance or service agreements from subcontractors.

The psychology literature shows that individuals, working alone, produce fewer ideas than the same individuals produce through brainstorming in small, face-to-face groups.

False

Top Ten Risk Item Tracking is a quantitative risk analysis tool.

False

Unknown risks can be managed proactively.

False

_____ are 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.

Risk factors

_____ involves prioritizing risks based on their probability and impact of occurrence. a. Performing qualitative risk analysis b. Identifying risks c. Planning risk responses d. Performing quantitative risk analysis

a. Performing qualitative risk analysis

_____ involves eliminating a specific threat, usually by eliminating its causes. a. Risk avoidance b. Risk acceptance c. Risk transference d. Risk mitigation

a. Risk avoidance

_____ involves doing whatever you can to make sure the positive risk happens. a. Risk exploitation b. Risk sharing c. Risk enhancement d. Risk acceptance

a. Risk exploitation Risk exploitation involves doing whatever you can to make sure the positive risk happens.

Risk utility rises at a decreasing rate for a _____ person. a. risk-seeking b. risk-averse c. risk-neutral d. risk-indifferent

b. risk-averse

What is the first step in a Monte Carlo analysis? a. Determine the probability distribution of each variable. b. For each variable, such as the time estimate for a task, select a random value based on the probability distribution for the occurrence of the variable. c. Assess the range for the variables being considered. d. Run a deterministic analysis or one pass through the model using the combination of values selected for each one of the variables.

c. Assess the range for the variables being considered.

_____ are predefined actions that the project team will take if an identified risk event occurs. a. Secondary risks b. Workarounds c. Contingency plans d. Management reserves

c. Contingency plans

Good project managers assume that their definition of success is the same as the sponsors.

false

The primary role of project stakeholder management is to ensure that the project will satisfy the stated needs for which it was undertaken.

false

a difference between operations and projects is that operations end when their objectives have been reached, whereas projects do not

false

responsibility assignment matrices and project organizational charts are examples of tools used in procurement management.

false

System or process _____ are diagrams that show how different parts of a system interrelate.

flowcharts

The main output of the _____ process is the start of a risk register.

identifying risks

Explain the basic steps involved in performing a Monte Carlo analysis.

1. Assess the range for the variables being considered. In other words, collect the most likely, optimistic, and pessimistic estimates for the variables in the model. For example, if you are trying to determine the likelihood of meeting project schedule goals, the project network diagram would be your model. You would collect the most likely, optimistic, and pessimistic time estimates for each task. This step is similar to collecting data for performing PERT estimates. However, instead of applying the same PERT weighted average formula, you go on to the following steps when performing a Monte Carlo simulation. 2. Determine the probability distribution of each variable. What is the likelihood of that variable falling between the optimistic and most likely estimates? For example, if an expert assigned to do a particular task provides a most likely estimate of ten weeks, an optimistic estimate of eight weeks, and a pessimistic estimate of fifteen weeks, you then ask what the probability is of completing that task between eight and ten weeks. The expert might respond that there is a 20 percent probability. 3. For each variable, such as the time estimate for a task, select a random value based on the probability distribution for the occurrence of the variable. For example, using the above scenario, you would randomly pick a value between eight weeks and ten weeks 20 percent of the time and a value between ten weeks and fifteen weeks 80 percent of the time. 4. Run a deterministic analysis or one pass through the model using the combination of values selected for each one of the variables. For example, the one task described above might have a value of 12 on the first run. All of the other tasks would have one random value assigned to them on that first run, also, based on their estimates and probability distributions. 5. Repeat Steps 3 and 4 many times to obtain the probability distribution of the model's results. The number of iterations depends on the number of variables and the degree of confidence required in the results, but it typically lies between 100 and 1,000. Using the project schedule as an example, the final simulation results will show you the probability of completing the entire project within a certain time period.