Risk Management - Sample Questions

	Risk Management Sample Questions

Questions

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1. Project Risk Management includes all of the following processes except:
Risk Monitoring and Control Risk Identification Risk Avoidance Risk Response Planning Risk Management Planning
2. Using the PMBOK definition of contingency reserve, which of the following statements about contingency reserves is false?
A contingency reserve is a separately planned quantity used to allow for future situations which may be planned for only in part. Contingency reserves may be set aside for known unknowns Contingency reserves may be set aside for unknown unknowns Contingency reserves are normally included in the project's cost and schedule baselines
3. Which of the following is not a tool or technique used during the Risk Quantification Process?
Expected monetary value Contingency planning Decision Trees Statistical sums All of the above are tools and techniques of Risk Quantification
4. Which of the following is true about pure risk?
The risk can be deflected or transferred to another party through a contract or insurance policy Pure risks involve the chance of both a profit and a loss No opportunities are associated with pure risk, only losses a and c a and b
5. A contingency plan is
A planned response that defines the steps to be taken if an identified risk event should occur A workaround A reserve used to allow for future situations which may be planned for only in part a and c a and b
6. The normal risk of doing business that carries opportunities for both gain and loss is called:
favorable risk opportunity risk pure risk business risk
7. A risk response which involves eliminating a threat is called:
Mitigation Deflection Avoidance Transfer b and d
8. Deflection or transfer of a risk to another party is part of which of the following risk response categories?
Mitigation Acceptance Avoidance Analysis
9. When should risk identification be performed? (select best answer)
During Concept Phase During Development Phase During Implementation Phase Risk identification should be performed on a regular basis throughout the project
10. Which of the following statements is false?
Uncertainty and risk are greatest at the start of the project and lowest at the end The amount at stake is lowest at the end of the project and greatest at the start Expected monetary value can be expressed as the product of the risk event probability and the risk event value Opportunities are positive outcomes of risk
11. A contingency plan is executed when:
A risk is identified An identified risk occurs When a workaround is needed All of the above b and c
12. Management reserves are used to handle which type of risk?
Unknown unknowns Known unknowns business risks pure risks
13. Which of the following techniques accounts for path convergence and generally estimates project durations more accurately?
CPM PERT Schedule simulation Path convergence method
14. Most schedule simulations are based on some form of which of the following?
Delphi PERT CPM Monte Carlo Analysis
15. When should a risk be avoided?
When the risk event has a low probability of occurrence and low impact When the risk event is unacceptable -- generally one with a very high probability of occurrence and high impact When it can be transferred by purchasing insurance A risk event can never be avoided
16. If a project has an 80% chance of having the scope defined by a certain date and a 70% chance of obtaining approval for the scope by a certain date, what is the probability of both events occurring?
75% 65% 50% 56% 66%
17. The independence of two events in which the occurrence of one is not related to the occurrence of the other is called:
event phenomenon independent probability statistical independence statistical probability
18. The one document that should always be used to help identify risk is the:
Risk Management Plan WBS Scope Statement Project Charter Contingency Plan
19. Risks are accepted when:
You develop a contingency plan to execute should the risk event occur You accept the consequences of the risk You transfer the risk to another party You reduce the probability of the risk event occurring a and b
20. An example of risk mitigation is:
Using proven technology in the development of a product to lessen the probability that the product will not work Purchasing insurance Eliminating the cause of a risk Accepting a lower profit if costs overrun a and b
21. A process that is not part of Project Risk Management is
Identification Solicitation Qualitative and Quantitative Analysis Response Development Monitoring and Control
22. A response to negative risk event is known as a:
Work item Work package Workaround Work breakdown structure
23. Who is responsible for risk identification, risk quantification, risk response development, risk response control?
Project Communications Management Project Human Resource Management Project Procurement Management Project Risk Management None of the above
24. In summing probability distributions what is the formula for Mean?
Mean = (a + m + b) / 2 Mean = (a + m + b) / 3 Mean = (a + m + b) / 1 Mean = (a + m + b)³
25. In beta distributions using PERT approximations what is the formula for Variance?
Variance = [(b - a) / 6] / 2 ² Variance = [(b - a) / 6] / 3 ³ Variance = [(b - a) / 6] ³ Variance = [(b - a) / 6] ²
26. When summing the probability distributions if the distributions are skewed to the __________, the project mean will always be significantly higher than the sum of the most likely estimates.
Right Left Middle Not skewed
27. By using Project Risk Management techniques project managers can develop strategies that do all but which of the following:
Significantly reduce project risks Eliminate project risks Provide a rational basis for better decision making Identifying risks, their impact(s), and any appropriate responses None of the above
28. Which phase of the project life cycle typically has the highest uncertainty and risk associated with it?
Concept Development Execution Conclusion All of the above
29. Risks classified as unknown (i.e., those which cannot be identified or evaluated):
Should be deflected to the contracting officer Should be handled via contingency allowances Should be ignored since they cannot be identified Should be ignored, since they are not covered in the Project Risk Assessment C and D
30. Risks can be divided into two basic types: business risk and pure (or insurable risk). Of the following, which one(s) fall(s) under business risk?
Liability Loss Direct property loss Profit loss Personnel-related loss B and C
31. The type of contract (payment mechanism) chosen for a project is of the degree of risk associated with completing that project. For a firm fixed price contract, payment for risks:
Is accomplished by paying the actual costs to the contractor Is accomplished by paying the contractor for his cost plus a fixed fee (profit) Is an undisclosed contingency in the contractor's bid Is accomplished by paying for the budgeted costs of dealing with as predicted in the Project Risk Assessment B and C
32. The principles of risk management should be followed only for:
Complex projects Simple projects Large projects A and C All of the above
33. Deflection involves the transfer of risk by such means as:
Contracting out to another party Developing schedule alternatives Developing discrete organizational functions under the project manager to handle risk events Disaster planning and responses None of the above
34. Risk mitigation involves all but which of the following:
Developing system standards (policies, procedures, responsibility standards) Obtaining insurance against loss Identification of project risks Performing contingent planning Developing planning alternatives
35. Total Project Risk
should not be calculated for small project is the probability of each project event times the sum of the consequences of individual project risk events is the cumulative sum of the probability of each individual project risk event times the consequences of occurrence of that risk event A and B A and C
36. In Project Risk Management, Risk Response may include actions to:
reduce the probability of risk events change the scope, budget, schedule, or quality specifications of the project reduce the consequences or severity of impacts of a potential risk event A and C all of the above
37. "Fast Tracked" project awarded and begun before all planning and risk assessment information is complete and available:
May be completed in reduced overall time than other project Are in a higher risk category than other projects Are not compatible with project risk assessment A and B All of the above
38. Risk event probability is determined as:
The total number of possible events divided into the expectation or frequency of the risk event The number of times the risk event may occur The fraction of the total project tasks which may be affected by the risk event The total number of possible events divided into the consequences of the risk event A and D
39. Final risk quantification and modeling normally considers the impacts of all risks combined and:
Translated the impacts into economic terms for analysis Concentrated on schedule impacts May not consider safety and environmental impacts A and B A and C
40. Sensitivity Analysis can be used in risk analysis to:
Substitute for uncertainty analysis in risk quantification Estimate the level of risk aversion adopted by management Estimate the effect of change of one project variable on the overall project A and B All of the above
41. Many companies self-insure against some risks. Problems which can arise from self-insurance include
failure to reserve funds to handle worst-case scenarios (low probability events) resulting in sever financial damage to the company stiff competition from insurance companies confusion of business risks with insurable risks A and C all of the above
42. Using the figure below, what is the probability of success for project B?
0.30 0.20 0.35 0.15 0.12
43. In performing an impact analysis the most effective tool to ensure all risks are identified on large projects is the:
Work breakdown structure Milestone review and schedule technique Cost / schedule Control system Planning programming budget system Program and evaluation review technique
44. Budgeted contingencies can be determined by:
Past experience Applying standard allowances Determining the sum total of the most probable variances of the various risk item properly identified All of the above None of the above
45. During which phase of the project life cycle is the amount at stake lowest?
Concept Development Execution Conclusion C and D
46. Contingent planning should include all but which of the following?
The development of a contingency allowance determined by combining (layering) various estimate segments to form larger estimate segments The development of schedule alternatives and work-arounds The management of a contingency budget An assessment of project shutdown liabilities A and C
47. Critical variance is best described as
variation beyond which the project will likely fail the variance resulting from sensitivity analysis the maximum tolerable variance in any single element of an estimate's bottom line total cost the contingency required for a given level of confidence C and D
48. The Delphi method involves brainstorming as a method of risk identification.
True False
49. Your manager has told you that you have a 10% chance of getting a "1" appraisal and an 80% chance of getting a "2" appraisal. What are you chances of getting a "3" appraisal?
less than 1% 10% at least 90% cannot be determined from this information
50. The single point standard deviations are 3, 5, 10, and 3 for the critical path. What is the standard deviation for the entire path?
21 12 143 5.5 impossible to determine without optimistic and pessimistic estimates
51. Mitigating risk could involve
identifying risks, obtaining insurance and developing alternatives contracting and quality assurance developing standards, buying insurance, and planning for contingencies and alternatives re-scoping the project and reassessing requirements C and D
52. The 200 million dollar nuclear power plant you have just built cannot be activated because a pair of rare spotted owls have just built their nest in your steam tower. You explain this to the CEO of the utility as
the importance of concern for endangered species an unknown - unknown a known - unknown an occurrence that should be handled via contingency allowances C and D
53. A manager who says "I'll pay for it, but I want it as soon as possible" is considered to be
authoritarian risk accepting risk averse in need of a solution intolerant of basic project management principles
54. If the mean is 3, the mode is 4, the median is 2, the PERT is 6, and one standard deviation is 3, a 95% confidence level is between
0 and 12 3 and 9 -3 and 9 1 and 7 0 and 6
55. Final risk quantification and modeling normally considers the impacts of all risks except possibly those due to
producibility reliability affordability acceptability operability
56. Risk management is defined as the art and science of _________ risk factors throughout the life cycle of a project.
researching, reviewing, and acting on identifying, analyzing, and responding to reviewing, monitoring, and managing identifying, reviewing, and avoiding analyzing, changing, and suppressing
57. Project risk is defined as the cumulative effect of the chances of _________ that will adversely affect project objectives.
likely events complex activities complex schedules uncertain occurrences new work
58. The three factors that characterize project risk are _________.
severity of impact, duration of impact, and cost of impact identification, type of risk category, and probability of impact risk event, risk probability, and the amount at stake occurrence, frequency, and cost cost, schedule, and quality
59. Risk event is the precise description of what might happen to the _________ of the project.
manager detriment schedule budget length
60. In the risk management context, mitigation and deflection are moth means of _________ the risk to the _________ objectives.
improving; client's increasing; project's decreasing; sponsor's decreasing; project's decreasing; corporation's
61. Contingency planning is a means to _________ risks to the project through a formal process and provide the resources to meet the risk events.
address classify assign resolve eliminate
62. Suppose a project manager is negotiating with a subcontractor to provide the installation and integration of a computer system with data links. The data links must access three different computer protocols and provide a common data communication. This integration of the data protocols has never been accomplished. Since both are attempting to avoid any risk, the project manager would like to a award a _________ contract, while the subcontractor would like to sign only a _________ contract.
letter; formal fixed-price; cost-plus cost-plus; fixed-price no-fault; no-obligation variable; lump-sum
63. Suppose a project manager of a research and development contract is charged with building a new radar antenna for an aircraft. The weight is limited to 12 pounds in the specification. This represents a major weight reduction over current systems, which weigh in excess of 26 pounds. Before starting the project, the project manager should __________.
attempt to cancel the cost-plus contract because the antenna just cannot be built to the specification ignore the situation because no one has said the antenna cannot be built to specification assess the probability of failing to meet the specification start work immediately to get most of the hardware fabricated so it can be weighed to determine the actual weight of the completed antenna delay and risk assessment until the project is better defined through building experience
64. Suppose the project manager is evaluating the bids of two vendors. Each vendor offers to sell similar electronic components, which are integrated at the vendors site. To avoid the most risk, the project manager views items such as the vendor's __________.
price, sales volume, and profit margin price, promised delivery, and inspection schedule personnel policies, personnel training program, and price price, experience, and delivery means experience, personnel skills, and material control procedures
65. Suppose the project manager must submit a summary risk assessment to the director of project managers. The assessment is to be made for each component of a new electronics system. The project manager submits the following: Component A - Low Risk Component B - Medium Risk Component C - Moderate Risk Component D - High Risk Component E - Medium Risk The problem with the project manager's risk assessment is that __________.
the project risk has a full range of risk values the project risk is normally distributed the project risk has one high risk assessment that could cause problems the project risk assessment does not have a uniform evaluation criteria for the middle risk category there is no identifiable problem
66. Suppose the project is set at $2,300,000 for the total project. Some work that must be accomplished has not been identified in the initial planning. The most appropriate source of funds to cover this work is the __________.
management reserve contingency reserve slush fund reserve sinking fund corporate profit
67. Suppose the project manager is planning courses of action to develop the strategy for the project. Courses "A" and "B" are both feasible options and can be implemented. Senior management has directed that risk be considered, but there is a need to maximize the profit on this project. A decision tree is used as a valid means for selecting the most profitable option. Course "A" has a potential profit of $27,500 with a probability of 0.75 success. Course "B" has a potential profit of $20,800 with a probability of 0.90 success. The course of action that should be selected is __________.
Course "A" because it has a higher profit potential Course "B" because it has a higher probability of success Course "A" because it has an expected value of $36,667 when the probability is factored into the decision Course "A" because it has an expected value of $1,905 more than Course "B" Either course because there is no difference in expected value
68. Suppose the project has many hazards that could easily injure one or more persons and there is no method of avoiding the potential for damages. The project manager should consider __________ as a means of deflecting the risk.
abandoning the project buying insurance for personal bodily injury establishing a contingency fund establishing a management reserve not acknowledging the potential for injury
69. The primary characteristic that distinguishes external and internal risk areas is the __________.
magnitude of the impact on the project project manager's perception of risk technical nature of the project use of more or fewer subcontractors project manager's ability to influence the risk
70. There are two general categories of risk areas, internal and external. Examples of external risk areas are __________.
schedule delays, cost overruns, and changes in technology regulatory, project completion, and taxation natural disasters, regulatory, and design currency rates, design, and social impact inflation rates, performance, and schedule delays
71. In the area of legal risks, there are two reasons for licensing of projects. One reason is for revenue generation by the community, while the other is for __________.
harassment of the project manager bureaucratic interest in the project public safety of the product monitoring of the project schedule identification of the project manager
72. Intellectual property rights assigned to an individual by means of a patent or copyright have value to the owner. Any infringement on those rights during the implementation of a project can __________.
cause a law suit to be initiated for damages cause the project to be halted pending a legal determination of property rights cause damages to be awarded to the holder of a patent diminish the reputation of the project's parent corporation all of the above
73. During the conduct of impact analysis for any risk, the individual performs screening. Screening is for the purpose of determining whether the risk is __________ the project.
within or outside the scope of a contingency item for significant enough to adversely affect realistic and treatable during implementation of all of the above
74. Suppose a project of $1.5 million has an adverse event that has a probability of 0.07 of occurrence and a potential loss of $15,000. This represents an expected negative value of __________.
$10,500 $1,050 $105 $15,000 cannot be determined from the available data
75. The assigned values of risk for a project is best accomplished through a structured methodology that ensures all project elements are evaluated. The project tool that is best suited for the structured analysis of the project risk is the __________.
contract specification statement of work work breakdown structure linear programming diagram
76. During the assessment of the risk to attempt to quantify the probability of failure and the amount of potential loss, the project manager uses the __________ personnel to make the estimates.
engineering marketing experienced planning project
77. Suppose during the risk analysis process that one identified risk event cannot be avoided, mitigated, or insured. The risk event is a critical item that, if it occurs, could cause the project to fail. the best option for the project manager is to __________.
play down the risk because the team will find a means of overcoming any failure place special emphasis on the risk event to intensely manage that item and all interfacing items have the risk assessment team continue to analyze the risk event until it reduces the expected negative value continue to search for an insurance company that will assume the risk ignore the risk assessment because any assigned value is a point estimate that is never precisely the expected state of nature
78. Suppose during project implementation on a fixed price contract, the budget for one work package has cost more than estimated because of an error that required reworking the task. The cost of materials and labor to rework the task required is $3,117 more than the budget. The money for this rework is covered by the __________.
contingency funds management reserve overhead charges profit margin G&A charges
79. The PERT (Program Evaluation and Review Technique) is a method of scheduling projects. In the context of risk, PERT is better than CPM (Critical Path Method) because it deals with the __________.
logic associated with the cost estimates logic associated with the schedule estimates certainly associated with the cost estimates uncertainty associated with the schedule estimates certainty associated with the schedule estimates
80. Suppose the project manager establishes a risk model that will be used on the CALTRON Project. The risk model identifies the risk events and assigns probabilities of occurrence. However, what is missing from the risk model is __________.
nothing. the model is complete that the risk probabilities need to be summed to determine the total project risk that the risk events must be labeled as internal or external risks that the risk events do not address the technology used by the CALTRON Project that the impact of the risk on the project's objectives has not been assessed and assigned
81. A high-risk project usually receives the highest priority by the top management. To effectively manage the project, the project manager should establish with the top management a charter that calls for his __________ and the basis for __________ without prior consultation.
schedule; change budget; change responsibilities; managing resources; obtaining additional resources obligations; conducting trade-offs
82. High-risk projects are always of concern to senior management and will receive the most scrutiny. The major concern of the project manager of a high-risk project is the tendency for senior management to often __________.
interrupt or intervene in the project's management avoid or deny the project's potential risk give low priority to resource allocation stay informed as to the project's progress give support to the project when additional resources are requested
83. Risk may be transferred from the owner (buyer) to the contractor (seller) through a contractual vehicle. the risk transfer is usually accomplished by the owner awarding a fixed price contract where the contractor agrees to perform for a single price. For the owner this simple solution has hidden costs that include all but __________.
conservatism in design and fabrication conservatism in scheduling a focus on the avoidance of liability, rather than the important project issues an unclear assignment of work because the contractor accepts no performance criteria loss of productivity through excessive checking (inspection)
84. Guarantees in a project agreement give some degree of assurance to the owner (buyer) that the end product will meet the specified requirements, but they also represent potential future costs to the contractor (seller), or cost risk, if the system fails. The four express (as compared to implied) guarantee categories are __________.
scope, cost, schedule, and quality design, safety, fabrication, and functional mechanical, electrical, software, and physical operational, functional, maintainability, and reparability design, workmanship, equipment, and performance (process)
85. A project may have an implied warranty that is not specifically detailed in the contract. This implied warranty represents potential future costs for failure to meet the requirements and is a risk to the project. Implied warranties are usually those associated with __________, which are spelled out in the Uniform Commercial Code.
conformance to requirements and safety of use regulatory agency requirements and environmental pollution lawful use of the product and safety of use merchantability and fitness for purpose operability and durability
86. Performance of a contract can bring liabilities that have implications of risk but are perhaps not as visible as the stated and implied warranty and guarantee. Two of these liabilities are __________ infringements.
trade secret and advanced technology process secret and advanced technology patent and copyright trade name and trade secret design and fabrication
87. Project risk through liability comes in two forms: breach of contract and a tort. Breach of contract is essentially a failure to perform the service or provide the required product, while a tort is a personal wrong such as __________.
an automobile accident an accident on commercial premises slander and battery assault and battery all of the above
88. Risk of loss may be transferred to an insurance underwriter by means of an insurance policy. Such policies state the monetary value of property damage that will be given for sustained losses. To make an informed decision about buying insurance, the project manager needs to determine the ratio of insurance cost and the expected value of the loss. for example, if the cost of insurance is $10,000, the value of the property is $200,000, and the probability of loss is 0.05 ( or five percent), the insurance is __________.
desirable because it will costs less than the probable losses undesirable because it costs more than the probable losses indeterminable because of insufficient data the same as the cost of the probable loss and there is no advantage none of the above
89. Lease, rental, and hire of equipment for short periods of time to perform specified project work is a common practice. The equipment poses __________ unless the contractor (lessor) __________.
no risk; abuses the equipment beyond fair usage no risk; assumes title to the equipment during the use period risk; insures for damages or loss risk; denies liability during the use period risk; is insured for the cost of lease, rental, or hire
90. The owner (buyer) of a project usually has the right to direct changes to the scope of work while the project work is being accomplished. Often, the owner will orally request a change and insist that the change be initiated immediately without the normal documentation (e.g., a change order). When the change is initiated without documentation, __________.
the owner assumes all responsibility for paying for the change although he may at a later date not want the change the owner assumes responsibility for one-half of the cost of the change until the documentation is completed and then assumes all at that time the project manager assumes all risk for the change, if initiated, until the documentation is received the project manager assumes only the risk of misinterpreting the owner's oral change directive, while the owner assumes responsibility for paying for the requested change it cannot be determined who is responsible for payment and risk without further information
91. The probability of failure for a project element is often called exposure to risk, or risk exposure. This exposure may be mitigated by taking measures to avoid a particular approach or use of specific technologies. When the risk exposure cannot be reduced through selection of another alternative, the project manager should __________.
conduct further studies and analyses until a more attractive alternative is found disregard the exposure to risk because nothing can be done not perform the activities with risk exposure and save the money that would have been spent on them hire an independent consultant to manage the risk exposure through extensive investigations and new technologies establish a contingency plan to overcome any adverse activity, which may include a contingency allowance
92. Project risk should be identified and assessed prior to project initiation during the planning phase. Once the implementation starts, there is less time to objectively assess risk and select the more attractive alternatives. During the implementation there may be indications of risk (i.e., failure to meet the project's objectives) such as __________.
numerous change orders pending approval instability of project progress information conflict between the project manager and customer loss of focus on the work by line supervisors all of the above
93. The project manager may realize that some terms of the contract and project objectives will not be met. It would be costly and time consuming to meet some specifications. The project has a high degree of exposure to risk at this point. Negotiation with the customer to reduce the risk exposure is a means that __________.
could eliminate all risk to the project and customer at no cost to either party could redefine the risk exposure to one of opportunities for both the project and customer could result in reduced scope for the project and an improved product for the customer may cost less to pay penalties and meet a modified specification to meet the minimum customer requirements all of the above
94. Demonstration and performance tests are used to prove the functional and operating characteristics of a deliverable to the customer. The tests pose a risk when the __________ criteria are selected to demonstrate the capabilities because __________.
low end; the system will be stressed to meet the minimum requirements and meet all the customer's requirements more stringent; the system may meet the requirements but fail the testing standard; the system will always pass the testing and not fully stress the functions manufacturer's; the system will always pass the testing and not fully stress the functions none of the above
95. Uncertainty is often used in conjunction with the term risk, implying that uncertainty is risk. Uncertainty is an unknown situation that may result from a lack of information to sufficiently quantify the probability of occurrence of an event and to determine the most likely outcome. Therefore, any uncertainty that has a potential for a major impact on a project should be __________.
assigned a risk exposure index of greater than or equal to eight pending further resolution of the risk exposure ignored until additional information can be obtained to resolve the actual risk exposure studied to determine alternatives that may have a high-risk index but are fully understood resolved before project implementation but must be resolved before starting that area of work resolved before project implementation or the project must be delayed pending a better understanding of the situation

1. Project Risk Management includes all of the following processes except:

Risk Monitoring and Control
Risk Identification
Risk Avoidance
Risk Response Planning
Risk Management Planning

2. Using the PMBOK definition of contingency reserve, which of the following statements about contingency reserves is false?

A contingency reserve is a separately planned quantity used to allow for future situations which may be planned for only in part.
Contingency reserves may be set aside for known unknowns
Contingency reserves may be set aside for unknown unknowns
Contingency reserves are normally included in the project's cost and schedule baselines

3. Which of the following is not a tool or technique used during the Risk Quantification Process?

Expected monetary value
Contingency planning
Decision Trees
Statistical sums
All of the above are tools and techniques of Risk Quantification

4. Which of the following is true about pure risk?

The risk can be deflected or transferred to another party through a contract or insurance policy
Pure risks involve the chance of both a profit and a loss
No opportunities are associated with pure risk, only losses
a and c
a and b

5. A contingency plan is

A planned response that defines the steps to be taken if an identified risk event should occur
A workaround
A reserve used to allow for future situations which may be planned for only in part
a and c
a and b

6. The normal risk of doing business that carries opportunities for both gain and loss is called:

favorable risk
opportunity risk
pure risk
business risk

7. A risk response which involves eliminating a threat is called:

Mitigation
Deflection
Avoidance
Transfer
b and d

8. Deflection or transfer of a risk to another party is part of which of the following risk response categories?

Mitigation
Acceptance
Avoidance
Analysis

9. When should risk identification be performed? (select best answer)

During Concept Phase
During Development Phase
During Implementation Phase
Risk identification should be performed on a regular basis throughout the project

10. Which of the following statements is false?

Uncertainty and risk are greatest at the start of the project and lowest at the end
The amount at stake is lowest at the end of the project and greatest at the start
Expected monetary value can be expressed as the product of the risk event probability and the risk event value
Opportunities are positive outcomes of risk

11. A contingency plan is executed when:

A risk is identified
An identified risk occurs
When a workaround is needed
All of the above
b and c

12. Management reserves are used to handle which type of risk?

Unknown unknowns
Known unknowns
business risks
pure risks

13. Which of the following techniques accounts for path convergence and generally estimates project durations more accurately?

CPM
PERT
Schedule simulation
Path convergence method

14. Most schedule simulations are based on some form of which of the following?

Delphi
PERT
CPM
Monte Carlo Analysis

15. When should a risk be avoided?

When the risk event has a low probability of occurrence and low impact
When the risk event is unacceptable -- generally one with a very high probability of occurrence and high impact
When it can be transferred by purchasing insurance
A risk event can never be avoided

16. If a project has an 80% chance of having the scope defined by a certain date and a 70% chance of obtaining approval for the scope by a certain date, what is the probability of both events occurring?

17. The independence of two events in which the occurrence of one is not related to the occurrence of the other is called:

event phenomenon
independent probability
statistical independence
statistical probability

18. The one document that should always be used to help identify risk is the:

Risk Management Plan
WBS
Scope Statement
Project Charter
Contingency Plan

19. Risks are accepted when:

You develop a contingency plan to execute should the risk event occur
You accept the consequences of the risk
You transfer the risk to another party
You reduce the probability of the risk event occurring
a and b

20. An example of risk mitigation is:

Using proven technology in the development of a product to lessen the probability that the product will not work
Purchasing insurance
Eliminating the cause of a risk
Accepting a lower profit if costs overrun
a and b

21. A process that is not part of Project Risk Management is

Identification
Solicitation
Qualitative and Quantitative Analysis
Response Development
Monitoring and Control

22. A response to negative risk event is known as a:

Work item
Work package
Workaround
Work breakdown structure

23. Who is responsible for risk identification, risk quantification, risk response development, risk response control?

Project Communications Management
Project Human Resource Management
Project Procurement Management
Project Risk Management
None of the above

24. In summing probability distributions what is the formula for Mean?

Mean = (a + m + b) / 2
Mean = (a + m + b) / 3
Mean = (a + m + b) / 1
Mean = (a + m + b)³

25. In beta distributions using PERT approximations what is the formula for Variance?

Variance = [(b - a) / 6] / 2 ²
Variance = [(b - a) / 6] / 3 ³
Variance = [(b - a) / 6] ³
Variance = [(b - a) / 6] ²

26. When summing the probability distributions if the distributions are skewed to the __________, the project mean will always be significantly higher than the sum of the most likely estimates.

Right
Left
Middle
Not skewed

27. By using Project Risk Management techniques project managers can develop strategies that do all but which of the following:

Significantly reduce project risks
Eliminate project risks
Provide a rational basis for better decision making
Identifying risks, their impact(s), and any appropriate responses
None of the above

28. Which phase of the project life cycle typically has the highest uncertainty and risk associated with it?

Concept
Development
Execution
Conclusion
All of the above

29. Risks classified as unknown (i.e., those which cannot be identified or evaluated):

Should be deflected to the contracting officer
Should be handled via contingency allowances
Should be ignored since they cannot be identified
Should be ignored, since they are not covered in the Project Risk Assessment
C and D

30. Risks can be divided into two basic types: business risk and pure (or insurable risk). Of the following, which one(s) fall(s) under business risk?

Liability Loss
Direct property loss
Profit loss
Personnel-related loss
B and C

31. The type of contract (payment mechanism) chosen for a project is of the degree of risk associated with completing that project. For a firm fixed price contract, payment for risks:

Is accomplished by paying the actual costs to the contractor
Is accomplished by paying the contractor for his cost plus a fixed fee (profit)
Is an undisclosed contingency in the contractor's bid
Is accomplished by paying for the budgeted costs of dealing with as predicted in the Project Risk Assessment
B and C

32. The principles of risk management should be followed only for:

Complex projects
Simple projects
Large projects
A and C
All of the above

33. Deflection involves the transfer of risk by such means as:

Contracting out to another party
Developing schedule alternatives
Developing discrete organizational functions under the project manager to handle risk events
Disaster planning and responses
None of the above

34. Risk mitigation involves all but which of the following:

Developing system standards (policies, procedures, responsibility standards)
Obtaining insurance against loss
Identification of project risks
Performing contingent planning
Developing planning alternatives

35. Total Project Risk

should not be calculated for small project
is the probability of each project event times the sum of the consequences of individual project risk events
is the cumulative sum of the probability of each individual project risk event times the consequences of occurrence of that risk event
A and B
A and C

36. In Project Risk Management, Risk Response may include actions to:

reduce the probability of risk events
change the scope, budget, schedule, or quality specifications of the project
reduce the consequences or severity of impacts of a potential risk event
A and C
all of the above

37. "Fast Tracked" project awarded and begun before all planning and risk assessment information is complete and available:

May be completed in reduced overall time than other project
Are in a higher risk category than other projects
Are not compatible with project risk assessment
A and B
All of the above

38. Risk event probability is determined as:

The total number of possible events divided into the expectation or frequency of the risk event
The number of times the risk event may occur
The fraction of the total project tasks which may be affected by the risk event
The total number of possible events divided into the consequences of the risk event
A and D

39. Final risk quantification and modeling normally considers the impacts of all risks combined and:

Translated the impacts into economic terms for analysis
Concentrated on schedule impacts
May not consider safety and environmental impacts
A and B
A and C

40. Sensitivity Analysis can be used in risk analysis to:

Substitute for uncertainty analysis in risk quantification
Estimate the level of risk aversion adopted by management
Estimate the effect of change of one project variable on the overall project
A and B
All of the above

41. Many companies self-insure against some risks. Problems which can arise from self-insurance include

failure to reserve funds to handle worst-case scenarios (low probability events) resulting in sever financial damage to the company
stiff competition from insurance companies
confusion of business risks with insurable risks
A and C
all of the above

42. Using the figure below, what is the probability of success for project B?
Case for question on risk

0.30
0.20
0.35
0.15
0.12

43. In performing an impact analysis the most effective tool to ensure all risks are identified on large projects is the:

Work breakdown structure
Milestone review and schedule technique
Cost / schedule Control system
Planning programming budget system
Program and evaluation review technique

44. Budgeted contingencies can be determined by:

Past experience
Applying standard allowances
Determining the sum total of the most probable variances of the various risk item properly identified
All of the above
None of the above

45. During which phase of the project life cycle is the amount at stake lowest?

Concept
Development
Execution
Conclusion
C and D

46. Contingent planning should include all but which of the following?

The development of a contingency allowance determined by combining (layering) various estimate segments to form larger estimate segments
The development of schedule alternatives and work-arounds
The management of a contingency budget
An assessment of project shutdown liabilities
A and C

47. Critical variance is best described as

variation beyond which the project will likely fail
the variance resulting from sensitivity analysis
the maximum tolerable variance in any single element of an estimate's bottom line total cost
the contingency required for a given level of confidence
C and D

48. The Delphi method involves brainstorming as a method of risk identification.

True
False

49. Your manager has told you that you have a 10% chance of getting a "1" appraisal and an 80% chance of getting a "2" appraisal. What are you chances of getting a "3" appraisal?

less than 1%
10%
at least 90%
cannot be determined from this information

50. The single point standard deviations are 3, 5, 10, and 3 for the critical path. What is the standard deviation for the entire path?

21
12
143
5.5
impossible to determine without optimistic and pessimistic estimates

51. Mitigating risk could involve

identifying risks, obtaining insurance and developing alternatives
contracting and quality assurance
developing standards, buying insurance, and planning for contingencies and alternatives
re-scoping the project and reassessing requirements
C and D

52. The 200 million dollar nuclear power plant you have just built cannot be activated because a pair of rare spotted owls have just built their nest in your steam tower. You explain this to the CEO of the utility as

the importance of concern for endangered species
an unknown - unknown
a known - unknown
an occurrence that should be handled via contingency allowances
C and D

53. A manager who says "I'll pay for it, but I want it as soon as possible" is considered to be

authoritarian
risk accepting
risk averse
in need of a solution
intolerant of basic project management principles

54. If the mean is 3, the mode is 4, the median is 2, the PERT is 6, and one standard deviation is 3, a 95% confidence level is between

0 and 12
3 and 9
-3 and 9
1 and 7
0 and 6

55. Final risk quantification and modeling normally considers the impacts of all risks except possibly those due to

producibility
reliability
affordability
acceptability
operability

56. Risk management is defined as the art and science of _________ risk factors throughout the life cycle of a project.

researching, reviewing, and acting on
identifying, analyzing, and responding to
reviewing, monitoring, and managing
identifying, reviewing, and avoiding
analyzing, changing, and suppressing

57. Project risk is defined as the cumulative effect of the chances of _________ that will adversely affect project objectives.

likely events
complex activities
complex schedules
uncertain occurrences
new work

58. The three factors that characterize project risk are _________.

severity of impact, duration of impact, and cost of impact
identification, type of risk category, and probability of impact
risk event, risk probability, and the amount at stake
occurrence, frequency, and cost
cost, schedule, and quality

59. Risk event is the precise description of what might happen to the _________ of the project.

manager
detriment
schedule
budget
length

60. In the risk management context, mitigation and deflection are moth means of _________ the risk to the _________ objectives.

improving; client's
increasing; project's
decreasing; sponsor's
decreasing; project's
decreasing; corporation's

61. Contingency planning is a means to _________ risks to the project through a formal process and provide the resources to meet the risk events.

address
classify
assign
resolve
eliminate

62. Suppose a project manager is negotiating with a subcontractor to provide the installation and integration of a computer system with data links. The data links must access three different computer protocols and provide a common data communication. This integration of the data protocols has never been accomplished. Since both are attempting to avoid any risk, the project manager would like to a award a _________ contract, while the subcontractor would like to sign only a _________ contract.

letter; formal
fixed-price; cost-plus
cost-plus; fixed-price
no-fault; no-obligation
variable; lump-sum

63. Suppose a project manager of a research and development contract is charged with building a new radar antenna for an aircraft. The weight is limited to 12 pounds in the specification. This represents a major weight reduction over current systems, which weigh in excess of 26 pounds. Before starting the project, the project manager should __________.

attempt to cancel the cost-plus contract because the antenna just cannot be built to the specification
ignore the situation because no one has said the antenna cannot be built to specification
assess the probability of failing to meet the specification
start work immediately to get most of the hardware fabricated so it can be weighed to determine the actual weight of the completed antenna
delay and risk assessment until the project is better defined through building experience

64. Suppose the project manager is evaluating the bids of two vendors. Each vendor offers to sell similar electronic components, which are integrated at the vendors site. To avoid the most risk, the project manager views items such as the vendor's __________.

price, sales volume, and profit margin
price, promised delivery, and inspection schedule
personnel policies, personnel training program, and price
price, experience, and delivery means
experience, personnel skills, and material control procedures

65. Suppose the project manager must submit a summary risk assessment to the director of project managers. The assessment is to be made for each component of a new electronics system. The project manager submits the following:

Component A - Low Risk
Component B - Medium Risk
Component C - Moderate Risk
Component D - High Risk
Component E - Medium Risk

The problem with the project manager's risk assessment is that __________.

the project risk has a full range of risk values
the project risk is normally distributed
the project risk has one high risk assessment that could cause problems
the project risk assessment does not have a uniform evaluation criteria for the middle risk category
there is no identifiable problem

66. Suppose the project is set at $2,300,000 for the total project. Some work that must be accomplished has not been identified in the initial planning. The most appropriate source of funds to cover this work is the __________.

management reserve
contingency reserve
slush fund reserve
sinking fund
corporate profit

67. Suppose the project manager is planning courses of action to develop the strategy for the project. Courses "A" and "B" are both feasible options and can be implemented. Senior management has directed that risk be considered, but there is a need to maximize the profit on this project. A decision tree is used as a valid means for selecting the most profitable option. Course "A" has a potential profit of $27,500 with a probability of 0.75 success. Course "B" has a potential profit of $20,800 with a probability of 0.90 success. The course of action that should be selected is __________.

Course "A" because it has a higher profit potential
Course "B" because it has a higher probability of success
Course "A" because it has an expected value of $36,667 when the probability is factored into the decision
Course "A" because it has an expected value of $1,905 more than Course "B"
Either course because there is no difference in expected value

68. Suppose the project has many hazards that could easily injure one or more persons and there is no method of avoiding the potential for damages. The project manager should consider __________ as a means of deflecting the risk.

abandoning the project
buying insurance for personal bodily injury
establishing a contingency fund
establishing a management reserve
not acknowledging the potential for injury

69. The primary characteristic that distinguishes external and internal risk areas is the __________.

magnitude of the impact on the project
project manager's perception of risk
technical nature of the project
use of more or fewer subcontractors
project manager's ability to influence the risk

70. There are two general categories of risk areas, internal and external. Examples of external risk areas are __________.

schedule delays, cost overruns, and changes in technology
regulatory, project completion, and taxation
natural disasters, regulatory, and design
currency rates, design, and social impact
inflation rates, performance, and schedule delays

71. In the area of legal risks, there are two reasons for licensing of projects. One reason is for revenue generation by the community, while the other is for __________.

harassment of the project manager
bureaucratic interest in the project
public safety of the product
monitoring of the project schedule
identification of the project manager

72. Intellectual property rights assigned to an individual by means of a patent or copyright have value to the owner. Any infringement on those rights during the implementation of a project can __________.

cause a law suit to be initiated for damages
cause the project to be halted pending a legal determination of property rights
cause damages to be awarded to the holder of a patent
diminish the reputation of the project's parent corporation
all of the above

73. During the conduct of impact analysis for any risk, the individual performs screening. Screening is for the purpose of determining whether the risk is __________ the project.

within or outside the scope of
a contingency item for
significant enough to adversely affect
realistic and treatable during implementation of
all of the above

74. Suppose a project of $1.5 million has an adverse event that has a probability of 0.07 of occurrence and a potential loss of $15,000. This represents an expected negative value of __________.

$10,500
$1,050
$105
$15,000
cannot be determined from the available data

75. The assigned values of risk for a project is best accomplished through a structured methodology that ensures all project elements are evaluated. The project tool that is best suited for the structured analysis of the project risk is the __________.

contract
specification
statement of work
work breakdown structure
linear programming diagram

76. During the assessment of the risk to attempt to quantify the probability of failure and the amount of potential loss, the project manager uses the __________ personnel to make the estimates.

engineering
marketing
experienced
planning
project

77. Suppose during the risk analysis process that one identified risk event cannot be avoided, mitigated, or insured. The risk event is a critical item that, if it occurs, could cause the project to fail. the best option for the project manager is to __________.

play down the risk because the team will find a means of overcoming any failure
place special emphasis on the risk event to intensely manage that item and all interfacing items
have the risk assessment team continue to analyze the risk event until it reduces the expected negative value
continue to search for an insurance company that will assume the risk
ignore the risk assessment because any assigned value is a point estimate that is never precisely the expected state of nature

78. Suppose during project implementation on a fixed price contract, the budget for one work package has cost more than estimated because of an error that required reworking the task. The cost of materials and labor to rework the task required is $3,117 more than the budget. The money for this rework is covered by the __________.

contingency funds
management reserve
overhead charges
profit margin
G&A charges

79. The PERT (Program Evaluation and Review Technique) is a method of scheduling projects. In the context of risk, PERT is better than CPM (Critical Path Method) because it deals with the __________.

logic associated with the cost estimates
logic associated with the schedule estimates
certainly associated with the cost estimates
uncertainty associated with the schedule estimates
certainty associated with the schedule estimates

80. Suppose the project manager establishes a risk model that will be used on the CALTRON Project. The risk model identifies the risk events and assigns probabilities of occurrence. However, what is missing from the risk model is __________.

nothing. the model is complete
that the risk probabilities need to be summed to determine the total project risk
that the risk events must be labeled as internal or external risks
that the risk events do not address the technology used by the CALTRON Project
that the impact of the risk on the project's objectives has not been assessed and assigned

81. A high-risk project usually receives the highest priority by the top management. To effectively manage the project, the project manager should establish with the top management a charter that calls for his __________ and the basis for __________ without prior consultation.

schedule; change
budget; change
responsibilities; managing
resources; obtaining additional resources
obligations; conducting trade-offs

82. High-risk projects are always of concern to senior management and will receive the most scrutiny. The major concern of the project manager of a high-risk project is the tendency for senior management to often __________.

interrupt or intervene in the project's management
avoid or deny the project's potential risk
give low priority to resource allocation
stay informed as to the project's progress
give support to the project when additional resources are requested

83. Risk may be transferred from the owner (buyer) to the contractor (seller) through a contractual vehicle. the risk transfer is usually accomplished by the owner awarding a fixed price contract where the contractor agrees to perform for a single price. For the owner this simple solution has hidden costs that include all but __________.

conservatism in design and fabrication
conservatism in scheduling
a focus on the avoidance of liability, rather than the important project issues
an unclear assignment of work because the contractor accepts no performance criteria
loss of productivity through excessive checking (inspection)

84. Guarantees in a project agreement give some degree of assurance to the owner (buyer) that the end product will meet the specified requirements, but they also represent potential future costs to the contractor (seller), or cost risk, if the system fails. The four express (as compared to implied) guarantee categories are __________.

scope, cost, schedule, and quality
design, safety, fabrication, and functional
mechanical, electrical, software, and physical
operational, functional, maintainability, and reparability
design, workmanship, equipment, and performance (process)

85. A project may have an implied warranty that is not specifically detailed in the contract. This implied warranty represents potential future costs for failure to meet the requirements and is a risk to the project. Implied warranties are usually those associated with __________, which are spelled out in the Uniform Commercial Code.

conformance to requirements and safety of use
regulatory agency requirements and environmental pollution
lawful use of the product and safety of use
merchantability and fitness for purpose
operability and durability

86. Performance of a contract can bring liabilities that have implications of risk but are perhaps not as visible as the stated and implied warranty and guarantee. Two of these liabilities are __________ infringements.

trade secret and advanced technology
process secret and advanced technology
patent and copyright
trade name and trade secret
design and fabrication

87. Project risk through liability comes in two forms: breach of contract and a tort. Breach of contract is essentially a failure to perform the service or provide the required product, while a tort is a personal wrong such as __________.

an automobile accident
an accident on commercial premises
slander and battery
assault and battery
all of the above

88. Risk of loss may be transferred to an insurance underwriter by means of an insurance policy. Such policies state the monetary value of property damage that will be given for sustained losses. To make an informed decision about buying insurance, the project manager needs to determine the ratio of insurance cost and the expected value of the loss. for example, if the cost of insurance is $10,000, the value of the property is $200,000, and the probability of loss is 0.05 ( or five percent), the insurance is __________.

desirable because it will costs less than the probable losses
undesirable because it costs more than the probable losses
indeterminable because of insufficient data
the same as the cost of the probable loss and there is no advantage
none of the above

89. Lease, rental, and hire of equipment for short periods of time to perform specified project work is a common practice. The equipment poses __________ unless the contractor (lessor) __________.

no risk; abuses the equipment beyond fair usage
no risk; assumes title to the equipment during the use period
risk; insures for damages or loss
risk; denies liability during the use period
risk; is insured for the cost of lease, rental, or hire

90. The owner (buyer) of a project usually has the right to direct changes to the scope of work while the project work is being accomplished. Often, the owner will orally request a change and insist that the change be initiated immediately without the normal documentation (e.g., a change order). When the change is initiated without documentation, __________.

the owner assumes all responsibility for paying for the change although he may at a later date not want the change
the owner assumes responsibility for one-half of the cost of the change until the documentation is completed and then assumes all at that time
the project manager assumes all risk for the change, if initiated, until the documentation is received
the project manager assumes only the risk of misinterpreting the owner's oral change directive, while the owner assumes responsibility for paying for the requested change
it cannot be determined who is responsible for payment and risk without further information

91. The probability of failure for a project element is often called exposure to risk, or risk exposure. This exposure may be mitigated by taking measures to avoid a particular approach or use of specific technologies. When the risk exposure cannot be reduced through selection of another alternative, the project manager should __________.

conduct further studies and analyses until a more attractive alternative is found
disregard the exposure to risk because nothing can be done
not perform the activities with risk exposure and save the money that would have been spent on them
hire an independent consultant to manage the risk exposure through extensive investigations and new technologies
establish a contingency plan to overcome any adverse activity, which may include a contingency allowance

92. Project risk should be identified and assessed prior to project initiation during the planning phase. Once the implementation starts, there is less time to objectively assess risk and select the more attractive alternatives. During the implementation there may be indications of risk (i.e., failure to meet the project's objectives) such as __________.

numerous change orders pending approval
instability of project progress information
conflict between the project manager and customer
loss of focus on the work by line supervisors
all of the above

93. The project manager may realize that some terms of the contract and project objectives will not be met. It would be costly and time consuming to meet some specifications. The project has a high degree of exposure to risk at this point. Negotiation with the customer to reduce the risk exposure is a means that __________.

could eliminate all risk to the project and customer at no cost to either party
could redefine the risk exposure to one of opportunities for both the project and customer
could result in reduced scope for the project and an improved product for the customer
may cost less to pay penalties and meet a modified specification to meet the minimum customer requirements
all of the above

94. Demonstration and performance tests are used to prove the functional and operating characteristics of a deliverable to the customer. The tests pose a risk when the __________ criteria are selected to demonstrate the capabilities because __________.

low end; the system will be stressed to meet the minimum requirements and meet all the customer's requirements
more stringent; the system may meet the requirements but fail the testing
standard; the system will always pass the testing and not fully stress the functions
manufacturer's; the system will always pass the testing and not fully stress the functions
none of the above

95. Uncertainty is often used in conjunction with the term risk, implying that uncertainty is risk. Uncertainty is an unknown situation that may result from a lack of information to sufficiently quantify the probability of occurrence of an event and to determine the most likely outcome. Therefore, any uncertainty that has a potential for a major impact on a project should be __________.

assigned a risk exposure index of greater than or equal to eight pending further resolution of the risk exposure
ignored until additional information can be obtained to resolve the actual risk exposure
studied to determine alternatives that may have a high-risk index but are fully understood
resolved before project implementation but must be resolved before starting that area of work
resolved before project implementation or the project must be delayed pending a better understanding of the situation

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