Project Management Test Bank Chapter 7 (Answers)

1) An uncertain event or condition that, if it occurs, has a positive or negative effect on project objectives is termed a A) random chance. B) disaster. C) risk. D) hazard. E) bad luck. 2) The chances of a risk event occurring as a project proceeds through its life cycle tend to A) slowly rise. B) drop sharply and then level out. C) rise sharply and then level out. D) remain about the same. E) slowly drop. 3) to The cost impact of a risk event occurring as a project proceeds through its life cycle tends A) B) C) D) E) rise over the life of the project. decline over the life of the project. rise at first, but then begin to decline over the life of the project. decline at first, but then begin to rise over the life of the project. remain the same over the life of the project. 4) The attempt to recognize and manage potential and unforeseen trouble spots that may occur when a project is implemented is known as A) risk forecasting. B) risk management. C) contingency planning. D) scenario analysis. E) disaster protection. 5) Which of the following is NOT one of the steps in the risk management process? A) Risk response development B) Risk assessment C) Risk identification D) Risk tracking E) Risk response control 6) The initial step in the risk management process is to A) determine the level of acceptable risk. B) assess the risk potential. C) identify the risks. D) set aside funds for managing the risks. E) appoint a risk manager. 7) One common mistake made early in the risk identification process is to A) not consider all possibilities. B) encourage participants be over optimistic. C) support participants being over pessimistic. D) focus on consequences and not on the events that could produce consequences. E) give too much attention to past events. 8) Organizations use __________ in conjunction with work breakdown structures to help management teams identify and eventually analyze risk. A) risk breakdown structures B) contingency breakdown structures C) scenario analysis D) organizational breakdown structure E) risk assessment 9) Which of the following groups should NOT be a part of the risk identification process? A) Project team B) Customers C) Subcontractors D) Vendors E) All of these groups can be included in the risk identification process 10) After your team has successfully identified potential risks that could affect the project, what is the next step? A) Create a risk breakdown structure B) Assess identified risks C) Create contingency plans D) Decide how to respond to all risks E) Mitigate risks 11) A list of questions that address traditional areas of uncertainty on a project is termed a A) risk profile. B) questionnaire. C) research matrix. D) query. E) checklist. 12) _______________ focuses on how to respond to events that have a positive impact on a project. A) Risk management B) Opportunity management C) Value management D) Contingency management E) Prospect management 13) Tools such as a risk assessment form and a risk severity matrix are used to A) identify risks. B) control risks. C) assess risks. D) regulate risks. E) respond to risks. 14) Based on the following, which event should you be most concerned about? Risk Event Bad weather Design flaw Accident Shipment delay Power outage A) B) C) D) E) Bad weather Design flaw Accident Shipment delay Power outage Likelihood 2 3 1 2 1 Impact 3 5 5 2 5 15) _____________ is a measure of how easy it would be to notice that a risk event was going to occur in time to take mitigating action, that is, how much warning you would have. A) Detection difficulty B) Impact scaling C) Probability analysis D) Awareness level E) Warning assessment 16) Purchasing an accident insurance policy would be an example of responding to a risk by _____________ it. A) mitigating B) retaining C) escalating D) transferring E) avoiding 17) The risk management tool that is divided into three color-coded zones representing major, moderate, and minor risks is the risk A) assessment form. B) responsibility matrix. C) scenario assessment. D) impact assessment. E) severity matrix. 18) The risk assessment form contains all of the following EXCEPT A) likelihood of the risk event occurring. B) potential impact of the risk event. C) who will detect the occurrence of the risk event. D) difficulty of detecting the occurrence of the risk event. E) when the risk event may occur. 19) Risks are evaluated in terms of A) likelihood and cost. B) cost and schedule. C) impact and cost. D) time and impact. E) likelihood and impact. 20) Adopting proven technology instead of experimental technology in order to eliminate technical failure would be an example of which risk response? A) Mitigating B) Retaining C) Escalating D) Transferring E) Avoiding 21) Which of the following activities might you consider adding a time buffer to? A) Activities with severe risks B) Merge activities that are prone to delays C) Activities with scarce resources D) Noncritical activities with very little slack E) You might consider adding a time buffer to any of these activities. 22) A fixed price contract is an example of A) avoiding risk. B) transferring risk. C) accepting risk. D) escalating risk. E) mitigating risk. 23) Which of the following is NOT one of the potential responses to a specific risk event? A) Mitigating B) Retaining C) Ignoring D) Transferring E) Avoiding 24) Which of the following is NOT included in a Failure Mode and Effects Analysis? A) Impact B) Probability C) Detection D) Risk value E) All of these are included 25) A Risk Response Matrix contains all of the following EXCEPT A) a contingency plan. B) a trigger. C) who is responsible. D) a response. E) when the risk will occur. 26) A key distinction between a risk response and a contingency plan is A) a risk response is established only for moderate risks while contingency plans are established for major risks. B) a risk response is part of the actual implementation plan and action is taken before the risk can materialize, while a contingency plan goes into effect only after the risk has transpired. C) a risk response is only effective when you are able to assess the likelihood of the risk and its impact on the project; all other risks are covered by contingency planning. D) a risk response is created by the project team and the project manager while the project manager and the customer agree on the contingency plan. E) a risk response is action that is the response to a risk once it has happened and the contingency plan is created by the customer if the risk response fails. 27) The risk associated with the unlikelihood that one of the key members will be struck by lightning would most likely be handled by which of the following? A) Mitigating B) Retaining C) Escalating D) Transferring E) Avoiding 28) Funds that are for identified risks that have a low probability of occurring and that decrease as the project progresses are called ______ reserves. A) management B) unidentified risk C) contingency D) padded E) just in case 29) Risks that can result in a system or process that will not work are known as A) technical risks. B) funding risks. C) schedule risks. D) cost risks. E) unnecessary risks. 30) One of the following five choices is NOT involved in risk control. Which choice is it? A) Executing the risk response strategy B) Initiating contingency plans C) Establishing a change control system D) Establishing contingency funds E) Watching for new risks 31) One of the choices below refers to major unforeseen risks and endeavors to supply funds for the same. Which choice is it? A) Project reserves B) Management reserves C) Time buffers D) Activity reserves E) Contingency reserves 32) Change management systems are designed to accomplish all of the following EXCEPT A) track all changes that are to be implemented. B) review, evaluate, and approve/disapprove proposed changes formally. C) identify expected effects of proposed changes on schedule and budget. D) reflect scope changes in baseline and performance measures. E) All of these are examples of what change management systems are designed to accomplish. 33) An unanticipated event that occurs which is beneficial to a project is known as a(n) A) Management Reserve B) Success Factor C) Opportunity D) Risk E) Desirable event 34) This response is used to remove any uncertainty associated with an identified opportunity. A) Exploit B) Share C) Enhance D) Accept E) Escalate 35) This response allocates some or all of the responsibility of realizing the identified opportunity for the project. A) Exploit B) Share C) Enhance D) Accept E) Escalate 36) This response is used to increase the potential effect of an identified opportunity. A) Exploit B) Share C) Enhance D) Accept E) Escalate 37) This response is used when an identified opportunity is not actively pursued. A) Exploit B) Share C) Enhance D) Accept E) Escalate A ____________ (responsible for the work package) involved in risk assessment and 38) mitigation will help focus attention on all aspects of risk management. A) project manager B) line person C) stakeholder D) team leader E) project sponsor 39) Including the change control system within the ________ is a key to a successful project. A) work breakdown structure B) project baseline C) risk management plan D) work breakdown structure and project baseline E) project baseline and risk management plan 40) The implications of an identified change need to be assessed by A) the primary project stakeholder. B) the chief fiscal officer. C) a person with expertise related to the change. D) the authorizing project manager. E) the program manager. 41) Most changes on a project are related to A) scope changes. B) improvement changes. C) implementing contingency plans. D) customer-driven changes to requirements. E) All of these alternatives are correct. 42) An uncertain event or condition that, if it occurs, has a positive or negative effect on project objectives is known as a __________. A) milestone B) risk C) happening D) instant in time E) event whose probability of occurrence is unknown 43) The likelihood of a risk occurring _____ as a project goes through its life cycle. A) increases B) decreases C) moderates D) amplifies E) becomes more probable 44) Which of the following is the first step to risk management? A) B) C) D) E) Risk identification Risk assessment Risk response development Risk response control Risk qualitative/quantitative analysis 45) The significance of a risk is assessed in terms of the _____ and the ______ of the risk. A) notoriety, visibility B) frequency, visibility C) impact, visibility D) likelihood, impact E) visibility, impact 46) A list of questions that address traditional areas of uncertainty on a project is known as a A) risk template B) risk profile C) risk questionnaire D) risk appraisal E) risk assessment 47) The measurement of how easy it would be to detect that the event was going to occur in time to take mitigating action (i.e., how much warning time we would have) is known as __________. A) risk measurement B) mitigation C) risk assessment D) detection difficulty E) detection measurement 48) The ________ form identifies each risk event, the likelihood of it occurring, the potential impact, when it may occur, and the degree of difficulty in detecting it. A) risk measurement B) mitigation C) detection difficulty D) risk assessment E) risk alleviation 49) The ________ matrix is divided into red, yellow, and green zones representing major, moderate, and minor risks. A) risk measurement B) mitigation C) detection difficulty D) risk assessment E) risk severity 50) According to the Failure Mode and Effects Analysis (FMEA), Impact × Probability × Detection = __________. A) risk severity B) risk assessment C) risk value D) risk mitigation E) risk difficulty 51) When considering risk response development, reducing the likelihood that an event will occur and/or reducing the impact that an adverse event would have on a project is known as _________ the risk. A) escalating B) mitigating C) avoiding D) transferring E) eliminating 52) When considering risk response development, changing the plan to eliminate the risk or condition is known as ____________ the risk. A) transferring B) escalating C) avoiding D) retaining E) diminishing 53) When considering risk response development, passing risk to another party instead of changing it is known as ____________ the risk. A) transferring B) escalating C) avoiding D) retaining E) diminishing 54) When considering risk response development, assuming the risk because the chance of such an event is slim is known as _________ the risk. A) transferring B) mitigating C) avoiding D) retaining E) escalating 55) Testing a new project on a smaller isolated area prior to installing it for the entire organization is an example of ________ a risk. A) transferring B) escalating C) avoiding D) retaining E) mitigating 56) Performance bonds, warranties, and insurance are examples of ________ a risk. A) transferring B) escalating C) avoiding D) retaining E) mitigating 57) Choosing to move a concert indoors to eliminate the threat of bad weather is an example of ____________ a risk. A) transferring B) escalating C) avoiding D) mitigating E) retaining 58) Flooding would be devastating to the project; however, it is very unlikely. The project manager is most likely to __________ this risk. A) prepare for B) retain C) diminish D) distribute E) acknowledge 59) The event or point in time when a contingency plan will be implemented is called a(n) _________. A) trigger B) milestone C) threshold D) contingency event E) execute event 60) ________ reserves are identified for specific work packages and are distributed by the project manager and the team members. A) Incremental B) Contingency C) Additional D) Work package E) Incidental 61) Which of the following responses best characterizes how to respond to a risk that has considerable upside, or opportunity? A) Mitigate risk B) Avoid risk C) Transfer risk D) Escalate risk E) Retain risk 62) ________ reserves are controlled by the project manager and the owner of the project and are used to cover major unforeseen risks to the entire project. A) Management B) Contingency C) Budgetary D) Unforeseen E) Incidental 63) What is the risk value of a risk whose impact score is 5, whose probability score is 5 and whose detection score is 1? A) 5 B) 25 C) 125 D) 11 E) 10 64) The lowest risk value that an identified risk can take is ________, while the highest risk value that an identified risk can take is ______. A) 1, 125 B) 0, 1 × 10 to the 300 power C) 1, 25 D) 0, 5 E) 1, 5 65) A ____________ is an alternative that will be used if a possible foreseen risk event becomes a reality. A) management plan B) risk management plan C) contingency plan D) alternative plan E) alternative risk plan 66) _____________ systems involve reporting, controlling, and recording changes to the project baseline. A) Proactive management B) Total management C) Change management D) Productive management E) Production management 67) Which verb best characterizes the concept of ‘Escalate’ when used as a risk response. A) Enhance B) Exacerbate C) Notify D) Increase E) Accelerate 68) Which of the following risks are likely to be retained? A) Risks of high consequence B) Risks of low likelihood C) Risks of high likelihood D) Risks that are escalated E) Risks that are transferred 69) Just as contingency funds are established to absorb unplanned costs, managers use ______to cushion against potential delays.? A) Management reserves B) Time buffers C) Budget reserves D) Project buffers E) Project reserves 70) What kind of plan goes into place should a risk event actually occur? A) A project plan B) A risk response C) A mitigation plan D) A contingency plan E) An escalation and enhancement plan 71) The table that shows each risk event as rows while columns will identify the name of the risk, the response to the risk, the contingency plan and the trigger is called what? A) Responsibility assignment matrix B) Risk response matrix C) Risk identification table D) Risk characterization table E) Risk assessment matrix 84) The probability that a risk event will occur is higher during the initial stages of a project. ⊚ true ⊚ false 85) Risk events that occur in the early stages of a project will have a greater cost impact than those that occur in later stages. ⊚ true ⊚ false 86) Risk management is a reactive approach that is designed to ensure that surprises are reduced and that negative consequences associated with undesirable events are minimized. ⊚ true ⊚ false 87) One common mistake that is made early on in the risk identification process is to focus on consequences and not on the events that could produce consequences. ⊚ true ⊚ false 88) The project being delayed is an example of a major risk that should be assessed. ⊚ true ⊚ false 89) The first step in the risk management process is risk assessment. ⊚ true ⊚ false 90) A risk profile is a list of questions that have been developed and refined from previous, similar projects. ⊚ true ⊚ false 91) The risk identification process should be limited to just the core project team. ⊚ true ⊚ false 92) While a "can do" attitude is essential during implementation, project managers have to encourage critical thinking when it comes to risk identification. ⊚ true ⊚ false 93) Responses to all identifiable risks should be a top priority for the project manager. ⊚ true ⊚ false 94) When considering risk value, the lower the value, the higher the level of risk. ⊚ true ⊚ false 95) If, during risk response development, you successfully identify how you will respond to a risk, contingency planning is unnecessary. ⊚ true ⊚ false 96) Adopting proven technology instead of experimental technology is an example of mitigating a risk. ⊚ true ⊚ false 97) A risk is an uncertain event that, if it occurs, can have a positive or negative effect on project objectives. ⊚ true ⊚ false 98) risk. Performance bonds, warranties, and guarantees are financial instruments used to share ⊚ ⊚ 99) true false Fixed-price contracts are an example of transferring risk from an owner to a contractor. ⊚ true ⊚ false 100) When developing a response to a risk by scheduling outdoor work in the summer, investing in up-front safety training, or choosing high-quality materials, these are examples of retaining a risk. ⊚ true ⊚ false 101) Contingency reserves are set up to cover identified risks associated with specific segments of a project while management reserves are set up to cover unidentified risks associated with the total project. ⊚ true ⊚ false 102) Change management systems involve reporting, controlling, and recording changes to the project baseline. ⊚ ⊚ true false 103) Enhancing a risk is a tactic that seeks to eliminate the uncertainty associated with an opportunity to ensure that it definitely happens. ⊚ true ⊚ false 104) Contingency funding is made up of contingency reserves and management reserves. ⊚ true ⊚ false 105) Although most risks are presented as something not desirable, there can also be desirable risks called Opportunities. ⊚ true ⊚ false 106) Opportunities identified within a project are treated very different from risks. ⊚ true ⊚ false 107) Having an environment where identified risks are treated professionally will lead to better control of risks. ⊚ true ⊚ false 108) A risk, which when analyzed, is discovered to have very modest downside but huge upside potential or opportunity. Such risks should be transferred, escalated and exploited. ⊚ true ⊚ false