EMV
VOCABULARY
RISK RESPONSES
Risk Mgmt Processes
Knowledge Areas
100
A project has the following risks: 5 percent probability of an additional acceptance test resulting in a three week delay; 50 percent probability the next software release will not be ready by the due date resulting in an eight week delay; 30 percent probability an expert resource becomes available resulting in a four week decrease in activity C. What is the expected monetary value? A) 20.65 days B) 29.05 days C) 77 days D) 84.23 days
What is A, "20.65 days" EXPLANATION: The expected monetary value takes into account the probability and the impact. The calculation is: (0.05 x 21) + (0.5 x 56) - (0.3 x 28) The last part is subtracted because it represents an opportunity and should be balanced against the threat. Source: PMP® Exam Prep Page: 387
100
Executing the risk response plan in order to react to risk events throughout the project is called: A) Contingency planning B) Monitoring and control C) Mitigation D) Life cycle costing.
What is B, "Monitoring and control" EXPLANATION: The Monitor and Control Risks process involves executing the risk response plan in order to respond to risk events over the course of the project. Source: PMP® Exam Prep Page: 399
100
When planning risk responses, the strategy of changing the project management plan to eliminate the risk is known as: A) Avoidance B) Transference C) Mitigation D) Acceptance
What is A, "Avoidance" EXPLANATION: This is the definition of the risk response strategy of avoidance. Source: PMP® Exam Prep Page: 393
100
Outputs of the Plan Risk Responses process include: A) Residual risks, fallback plans, and contingency reserves. B) Risk triggers, contracts, and a risk list. C) Secondary risks, process updates, and risk owners. D) Contingency plans, project management plan updates, and change requests.
What is A, "Residual risks, fallback plans, and contingency reserves" EXPLANATION: A risk list (choice B), process updates (choice C), and change requests (choice D) are not outputs of the Plan Risk Responses process. The items in choice A are all outputs of the Plan Risk Responses process, making choice A the correct answer. Source: PMP Exam Prep, Pg 395
100
You have a US $100,000,000 project that has 34 team members in four different countries. At the completion of project planning, you have identified six risks, 225 work packages, 13 stakeholders and seven phases to the project life cycle. What part of this project management plan needs to be revisited? A) The Identify Risks process B) The staffing management plan C) The network diagram D) The communications management plan
What is A, "The Identify Risks process" EXPLANATION: There is no indication that any other areas have a problem. For such a large project, the project manager should have identified more than six risks. Source: PMP Exam Prep, Pg 382
200
A project has the following risks: 20 percent probability of a 14 day delay in the receipt of customer requirements; 10 percent probability of a 21 day delay in the procurement process; 50 percent probability the integration will take 14 days longer. What is the expected monetary value of these events? A) 11.9 days B) 35.8 days C) 49 days D) Seven days
What is A, "11.9 days" EXPLANATION: The expected monetary value takes into account the probability and the impact. The calculation is (0.2 x 14) + (0.1 x 21) + (0.5 x 14). Source: PMP® Exam Prep Page: 387
200
A project manager analyzed a US $200,000 project that involves 30 team members and has three customers. Why is there a need for an analysis of secondary risks on this project? A) It provides a vehicle for efficient stakeholder involvement B) It provides a way to effectively decrease the amount of contracting on the project C) It helps create a prioritized list of risks D) It helps determine which new risks have been created as a result of the risk response strategies chosen
What is D, "It helps determine which new risks have been created as a result of the risk response strategies chosen" EXPLANATION: This question is asking, "What is a secondary risk?" Only choice D provides that answer. Source: PMP® Exam Prep Page: 395
200
During the identification of risks on your project, you have determined that there is a very high probability of conflict among the team during project executing over one aspect of the final design of the project. Which of the following is an example of mitigating the impact of the risk to the project? A) Obtain an insurance policy of rthe anticipated cost of the impact; B) Provide the team with training on conflict resolution techniques; C) Outsource that part of the project to another company; D) Eliminate that part of the project
What is B, "Provide the team with training on conflict resolution techniques" EXPLANATION: All the choices listed, except choice B, are examples of transference or avoidance. Source: PMP Exam Prep, Pg 393
200
Which part of the risk management process receives input from risk response owners? A) Identify Risks B) Perform Qualitative Risk Analysis C) Perform Quantitative Risk Analysis D) Plan Risk Responses
What is D, "Plan Risk Responses" EXPLANATION: The Plan Risk Responses process receives input from the risk response owners. Source: PMP Exam Prep, Pg 395
200
Your project team has identified dependencies on six related projects that are providing major deliverables to your project. Some of these projects have a very similar scope and may overlap with your deliverables. In light of this, which of the following processes should you be MOST concerned about? A) Control Scope B) Verify Scope C) Plan Risk Responses D) Plan Communications
What is C, "Plan Risk Responses" EXPLANATION: The biggest concern must be the risks that other projects may cause to yours. It would be better to prevent those problems in the Plan Risk Responses proces (choice C) than to just spend effort controlling scope (choice A). Source PMP Exam Prep, Pg 391
300
There is a probability of 0.1 that a given risk will occur in a project. It it occurs, it will result in a loss of US $10,000. The insurance cost for this event is US $700, with a deductible amount of US $250. Should a rational project manager buy this insurance? A) Yes, since $1,000 > $950 B) Yes, since $1,000 > $700 C) No, since the deductible amount changes the expected monetary value of the risk event D) No, since $1,250 > $1,000
What is A, "Yes, since $1,000 > $950" EXPLANATION: EMV = P x I. In this case, expected monetary value is 0.1 x $10,000, or $1,000. The insurance cost plus the deductible amount are less than the expected monetary value of the risk event. Source: PMP® Exam Prep Page: 387
300
The risks identified for the project must be analyzed to be able to rely on them during the rest of the risk management process. It would be MOST important to complete which of the following? A) Trigger data analysis B) Data quality assessment C) A risk rating matrix D) Analysis of trends in qualitative risk analysis
What is B, "Data quality assessment" EXPLANATION: Did you notice there is no such term as choice A? A risk rating matrix (choice C) only helps identify probability and impact. Trends (choice D) can only be analyzed when the work is ongoing. The situation described is taking place during project planning. The purpose of a data quality assessment (choice B) is to test the value of the data. Source: PMP® Exam Prep Page: 385
300
While preparing your risk responses, you realize that you have not planned for unknown risk events. You need to make adjustments to the project to compensate for unknown risk events. These adjustments are based on your past project experience when unknown risk events occurred and knocked the project off track. What should you do? A) Include a management reserve in the budget to try to compensate for the unknown risks, and notify management to expect unknown risks to occur. B) Document the unknown risk items and calculate the expected monetary value based on probability and impact that may result from the occurrence. C) Determine the unknown risk events and the associated cost, then add the cost to the project budget as reserves. D) With the stakeholders, determine a percentage of the known risk budget to allocate to a management reserve budget.
What is A, "Include a management reserve in the budget to try to compensate for the unknown risks, and notify management to expect unknown risks to occur." EXPLANATION: The correct answer is A. Notice how you have to read each choice carefully to get the correct answer? This question is asking how unknown risks are handled. It should be a reminder that, though the risk management process is designed to identify risks, not all risks can be identified. Some will inevitably remain unknown. Thus, unknown risks cannot be assessed (choice B) or identified (choice C) since they are "unknown". A management reserve is not calculated based on a percentage of known risks (choice D). The amount of known risk reserves will have no impact on the amount of unknown risks. Past history of what projects have needed is a better indicator. A management reserve is used for unknown risks, and it is wise to inform management that unknown risks can occur, making choice A best. Source: PMP® Exam Prep Page: 396
300
A list of risks for additional study is an output of: A) Identify Risks B) Plan Risk Management C) Perform Qualitative Risk Analysis D) Perform Quantitative Risk Analysis
What is C, "Perform Qualitative Risk Analysis" EXPLANATION: Some risks from Perform Qualitative Risk Analysis will be candidates for further study in Perform Quantitative Risk Analysis. Source: PMP® Exam Prep Page: 386
300
A project manager has been instructed to use the project charter to help identify risks on the project. This does not make sense to him. If you were asked to explain the reason the project charter is used in this way, what is the BEST explanation? A) The project charter describes the business needs of the project. B) Reviewing what is said and not said in the project charter will help determine risks. C) The project charter is issued by the sponsor. D) Reviewing the project charter will help determine a description of the product of the project.
What is B, "Reviewing what is said and not said in the project charter will help determine risks" EXPLANATION: Some of the other choices are correct statements but do not answer the question. Source: PMP® Exam Prep Page: 383
400
A project manager is unsure of how much cost reserve to add to the project. There is a 50 percent chance of a weather delay causing an impact of US $100,000 and a 30 percent chance of a delay in the testing center with a US $20,000 impact. How much should the cost reserve be? A) Less than $50,000 B) More than $120,000 C) Less than $20,000 D) More than $56,000
What is D, "More than $56,000" EXPLANATION: A contingency reserve covers specific project risks; the known unknowns. The calculation is (0.5 x $100,000) + (0.3 x $20,000). Therefore, the answer is D. It is common practice to add management reserve for unknown unknowns, especially when there are only two identified risks. Source: PMP® Exam Prep Page: 397
400
During the Identify Risks process, a project manager identifies a risk that, no matter what the company does, a fire could occur in the building during the testing. It would be BEST to ___the risk. A) Deflect B) Accept C) Avoid D) change
What is A, "Deflect" EXPLANATION: Remember that the word "avoid" (choice C) does not mean "prevent from happening." Rather, it means "eliminate the cause." Such risks are normally handled by purchasing insurance. "Deflect" is another word for "transfer." Source: PMP® Exam Prep Page: 393
400
During the Plan Risk Responses process, the team is discussing ways to deal with a risk. They have ocme up with the following options: a) outsource the work, b) provide more training to the team members, c) wait to see if the risk actually happens, d) ignore the risk and e) do the risky activity sooner in the project. Which of the following is a risk response strategy that was forgotten in the above situation? A) Remove the activity causing the risk from the project B) Purchase insurance to cover the anticipated cost C) Assign the activity to a more experienced person to handle D) Prototype the product
What is A, "Remove the activity causing the risk from the project" EXPLANATION: Risk avoidance is missing from this list of options. The only choice that relates to risk avoidance is choice A. Source: PMP® Exam Prep Page: 393
400
Probabilistic analysis of the project and probability of achieving the project cost or time are completed during: A) Identify Risks B) Perform Qualitative Risk Analysis C) Perform Quantitative Risk Analysis D) Plan Risk Responses
What is C, "Perform Quantitative Risk Analysis" EXPLANATION: These are all completed during the Perform Quantitative Risk Analysis process. Source: PMP® Exam Prep Page: 386
400
You have been appointed as the manager of a new, large, and complex project. Because this project is business-critical and very visible, senior management has told you to analyze the project's rists and prepare response strategies for them as soon as possible. The organization has risk management procedures that are seldom used or followed, and has had a history of handling risks badly. The project's first milestone is in two weeks. In preparing the risk response plan, input from which of the following is generally LEAST important? A) Project team members B) Project sponsor C) Individuals responsible for risk management policies and templates D) Key stakeholders
What is B, "Project sponsor" EXPLANATION: Team members (choice A) will have knowledge of the project and the product of the project and will thus have a lot to contribute to risk responses. Those responsible for risk templates (choice C) will be able to provide the templates from past projects (historical records) and therefore will be very important. Key stakeholders (choice D) will know more about the technical working of the project to help plan "What are we going to do about it?" so choice D is not likely to be the least important. The sponsor (choice B) may have the least knowledge of what will work to solve the problems. Sponsors need to be involved in the project and help identify risks. They may even approve the response plans created by others, but they would not generally be major contributors to response plans. This makes B the best choice. Source: PMP® Exam Prep Page: 392
500
You are a project manager for a major telecommunications network upgrade with a net present value (NPV) of US $10,000,000. You are heavily dependent on a third party vendor for your project and your contract office informs you that there is a 30 percent chance that the vendor will go out of business a the end of the quarter. It that occurs, your project will incur a US $3,000,000 cost overrun due to rework. There is also a 30 percent chance that a new legislation will pass that will decrease government oversight of your team's work. If this legislation passes, you estimate that your project will save US $1,600,000 in time delays. Lastly, your technical lead indicates that there is 20 percent chance that a new software package will be available by month end that could save US $1,800,000 in testing time. If available, the software will cost US $500,000 to procure, install, and train. What is the total expected monetary value of these three risk events? A) $60,000 B) $1,640,000 C) $5,900,000 D) $160,000
What is D, "$160,000 EXPLANATION: The expected monetary value of the first risk is 0.3 x $3,000,000 or $900,000. The expected monetary value of the second event is 0.3 x -$1,600,000 or -$480,000. The expected monetary value of the third risk is 0.2 x (-$1,800,000 - $500,000) or -$260,000. The total of all three potential risk events is $900,000 - $480,000 - $260,000 or $160,000. Source: PMP® Exam Prep Page: 387
500
During a voice conference, one team member suggests that a more experienced person be used on the project. Another talks about using a person with more training. Which of the following BEST describes what is being done? A) Plan Risk Responses B) Resource Leveling C) Define Activities D) Develop Project Team
What is A, "Plan Risk Responses" EXPLANATION: Resource leveling (choice B) involves analysis of the number of resoures used. Choice C occurs before the team is selected. Choice D occurs after the team has been selected. The team is trying to respond to a risk by changing a resource. The answer is choice A. Source: PMP® Exam Prep Page: 391
500
Allocating ownership of a risk to a third party who is best able to capture the opportunity is an example of ____ the risk. A) Sharing B) Enhancing C) Exploiting D) Accepting
What is A, "Sharing" EXPLANATION: Did you notice that this risk is an opportunity? Source: PMP® Exam Prep Page: 393
500
Determining cost and schedule reserves, identifying risks requiring the most attention, and determining the overall project risk exposure are all part of the processes of Perform Qualitative Risk Analysis, Perform Quantitative Risk Analysis, and: A) Plan Risk Responses B) Monitor and Control Risks C) Identify Risks D) Plan Risk Management
What is A, "Plan Risk Responses" Source: PMP® Exam Prep Page: 395
500
Which of the following BEST describes when the team and stakeholders identify risks? A) During the Verify Scope process B) After the project charter is received and before the work breakdown structure is created C) Whenever there is a change to the project D) Before the project charter is created
What is C, "Whenever there is a change to the project" EXPLANATION: Generally, project risks are identified after you have the WBS (choice B), the project charter is created (choice D), and before the Verify Scope process (choice A). Risk identification must happen after each change. Source: PMP® Exam Prep Page: 384
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