Chapter 11 Project Risk Management

Chapter 11: Project Risk Management True / False 1. Risks can have both negative and positive effects on meeting project objectives. a. True b. Fals e ANSWER: True RATIONALE: Feedback: Project risk management involves understanding potential problems that might occur on the project and how they might impede project success. However, there are also positive risks or opportunities, which can result in good outcomes for a project. POINTS: 1 DIFFICULTY: Difficulty: Easy REFERENCES p.429 : LEARNING O INFO.SCHW.14.77 - LO: 11-1 BJECTIVES: NATIONAL STUnited States - BUSPROG: Technology ANDARDS: TOPICS: The Importance Of Project Risk Management KEYWORDS: Bloom's: Knowledge 2. One possible response to managing negative risk it to accept the potential effects from the risk. a. True b. Fals e ANSWER: True RATIONALE: Feedback: There are a number of possible actions that project managers can take to avoid, lessen, change or accept the potential effects of risk on their projects. POINTS: 1 DIFFICULTY: Difficulty: Easy REFERENCES p.429 : LEARNING O INFO.SCHW.14.77 - LO: 11-1 BJECTIVES: NATIONAL STUnited States - BUSPROG: Technology ANDARDS: TOPICS: The Importance Of Project Risk Management KEYWORDS: Bloom's: Knowledge 3. A risk-seeking person prefers outcomes that are more uncertain and is often willing to pay a penalty to take risks. a. True b. Fals e ANSWER: True RATIONALE: Feedback: A risk-seeking person prefers outcomes that are more uncertain and is often willing to pay a penalty to take risks. Page 1 Chapter 11: Project Risk Management POINTS: 1 DIFFICULTY: Difficulty: Moderate REFERENCES: p.431 LEARNING OBJ INFO.SCHW.14.77 - LO: 11-1 ECTIVES: NATIONAL STAN United States - BUSPROG: Analytic DARDS: TOPICS: KEYWORDS: The Importance Of Project Risk Management Bloom's: Knowledge 4. Unknown risks can be managed proactively. a. True b. Fals e ANSWER: False RATIONALE: Feedback: Known risks can be managed proactively. However, unknown risks, or risks that have not been identified and analyzed, cannot be managed. POINTS: 1 DIFFICULTY: Difficulty: Moderate REFERENCES p.431 : LEARNING O INFO.SCHW.14.77 - LO: 11-1 BJECTIVES: NATIONAL STUnited States - BUSPROG: Technology ANDARDS: TOPICS: The Importance Of Project Risk Management KEYWORDS: Bloom's: Knowledge 5. The last step in project risk management is deciding how to address this knowledge area for a particular project by performing risk management planning. a. True b. Fals e ANSWER: False RATIONALE: Feedback: The first step in project risk management is deciding how to address this knowledge area for a particular project by performing risk management planning. POINTS: 1 DIFFICULTY: Difficulty: Easy REFERENCES p.433 : LEARNING O INFO.SCHW.14.77 - LO: 11-1 BJECTIVES: NATIONAL STUnited States - BUSPROG: Technology ANDARDS: TOPICS: The Importance Of Project Risk Management Page 2 Chapter 11: Project Risk Management KEYWORDS: Bloom's: Comprehension 6. Contingency plans are predefined actions that the project team will take if an identified risk event occurs. a. True b. Fals e ANSWER: True RATIONALE: Feedback: Contingency plans are predefined actions that the project team will take if an identified risk event occurs. POINTS: 1 DIFFICULTY: Difficulty: Moderate REFERENCES: p.438 LEARNING OBJE INFO.SCHW.14.78 - LO: 11-3 CTIVES: NATIONAL STANUnited States - BUSPROG: Technology DARDS: TOPICS: KEYWORDS: Common Sources Of Risk On IT Projects Bloom's: Knowledge 7. Brainstorming is a systematic, interactive forecasting procedure based on independent and anonymous input regarding future events. a. True b. Fals e ANSWER: False RATIONALE: Feedback: Brainstorming is a technique by which a group attempts to generate ideas or find a solution for a specific problem by amassing ideas spontaneously and without judgment. The Delphi technique is a systematic, interactive forecasting procedure based on independent and anonymous input regarding future events. POINTS: 1 DIFFICULTY: Difficulty: Moderate REFERENCES p.439 : LEARNING O INFO.SCHW.14.79 - LO: 11-4 BJECTIVES: NATIONAL STUnited States - BUSPROG: Technology ANDARDS: TOPICS: Identifying Risks KEYWORDS: Bloom's: Comprehension 8. The psychology literature shows that individuals, working alone, produce fewer ideas than the same individuals produce through brainstorming in small, face-to-face groups. a. True b. Fals e ANSWER: False Page 3 Chapter 11: Project Risk Management RATIONALE: Feedback: Although businesses use brainstorming widely to generate new ideas, the psychology literature shows that individual people working alone produce a greater number of ideas than they produce through brainstorming in small, faceto-face groups. POINTS: 1 DIFFICULTY: Difficulty: Moderate REFERENCES p.439 : LEARNING O INFO.SCHW.14.79 - LO: 11-4 BJECTIVES: NATIONAL STUnited States - BUSPROG: Technology ANDARDS: TOPICS: Identifying Risks KEYWORDS: Bloom's: Knowledge 9. The Delphi technique is a systematic, interactive forecasting procedure based on independent and anonymous input regarding future events. a. True b. Fals e ANSWER: True RATIONALE: Feedback: The Delphi technique is an approach to gathering information that helps prevent some of the negative group effects found in brainstorming. The basic concept of the Delphi technique is to derive a consensus among a panel of experts who make predictions about future developments. POINTS: 1 DIFFICULTY: Difficulty: Moderate REFERENCES p.439 : LEARNING O INFO.SCHW.14.79 - LO: 11-4 BJECTIVES: NATIONAL STUnited States - BUSPROG: Technology ANDARDS: TOPICS: Identifying Risks KEYWORDS: Bloom's: Knowledge 10. Risk events refer to specific, certain events that may occur to the detriment or enhancement of the project. a. True b. Fals e ANSWER: False RATIONALE: Feedback: Risk events refer to specific, uncertain events that may occur to the detriment or enhancement of the project. POINTS: 1 DIFFICULTY: Difficulty: Moderate REFERENCES: p.440 LEARNING OBJE INFO.SCHW.14.79 - LO: 11-4 Page 4 Chapter 11: Project Risk Management CTIVES: NATIONAL STANUnited States - BUSPROG: Technology DARDS: TOPICS: KEYWORDS: Identifying Risks Bloom's: Knowledge 11. A probability/impact matrix or chart lists the relative probability of a risk occurring on one side of a matrix or axis on a chart and the relative impact of the risk occurring on the other. a. True b. Fals e ANSWER: True RATIONALE: Feedback: A project manager can chart the probability and impact of risks on a probability/impact matrix or chart, which lists the relative probability of a risk occurring and the relative impact of the risk occurring. POINTS: 1 DIFFICULTY: Difficulty: Moderate REFERENCES p.443 : LEARNING O INFO.SCHW.14.80 - LO: 11-5 BJECTIVES: NATIONAL STUnited States - BUSPROG: Technology ANDARDS: TOPICS: Performing Qualitative Risk Analysis KEYWORDS: Bloom's: Knowledge 12. Top Ten Risk Item Tracking is a quantitative risk analysis tool. a. True b. Fals e ANSWER: False RATIONALE: Feedback: Top Ten Risk Item Tracking is a qualitative risk analysis tool. POINTS: 1 DIFFICULTY: Difficulty: Moderate REFERENCES: p.444 LEARNING OBJECTIVES:INFO.SCHW.14.80 - LO: 11-5 NATIONAL STANDARDS: United States - BUSPROG: Technology TOPICS: Performing Qualitative Risk Analysis KEYWORDS: Bloom's: Knowledge 13. The Microsoft Solution Framework (MSF) includes a risk management model that includes developing and monitoring a top-ten master list of risks. a. True b. Fals Page 5 Chapter 11: Project Risk Management e ANSWER: True RATIONALE: Feedback: The Microsoft Solution Framework (MSF) includes a risk management model that includes developing and monitoring a top ten master list of risks. MSF is the methodology Microsoft uses for managing projects. POINTS: 1 DIFFICULTY: Difficulty: Moderate REFERENCES p.445 : LEARNING O INFO.SCHW.14.80 - LO: 11-5 BJECTIVES: NATIONAL STUnited States - BUSPROG: Technology ANDARDS: TOPICS: Performing Qualitative Risk Analysis KEYWORDS: Bloom's: Knowledge 14. Quantitative risk analysis need not be done for projects that are large and complex. a. True b. Fals e ANSWER: True RATIONALE: Feedback: Quantitative risk analysis often follows qualitative risk analysis, yet both processes can be done together or separately. On some projects, the team may only perform qualitative risk analysis. The nature of the project and availability of time and money affect which risk analysis techniques are used. Large, complex projects involving leading-edge technologies often require extensive quantitative risk analysis. POINTS: 1 DIFFICULTY: Difficulty: Moderate REFERENCES p.447 : LEARNING O INFO.SCHW.14.81 - LO: 11-6 BJECTIVES: NATIONAL STUnited States - BUSPROG: Technology ANDARDS: TOPICS: Performing Quantitative Risk Analysis KEYWORDS: Bloom's: Comprehension 15. The lower the earned monetary value calculation for a project, the chances of project success is higher. a. True b. Fals e ANSWER: False RATIONALE: Feedback: Expected monetary value (EMV) is the product of a risk event probability and the risk event’s monetary value. Because the EMV provides an estimate for the total dollar value of a decision, you want to have a positive number; the higher the EMV, the better. Page 6 Chapter 11: Project Risk Management POINTS: 1 DIFFICULTY: Difficulty: Moderate REFERENCES p.447-448 : LEARNING O INFO.SCHW.14.81 - LO: 11-6 BJECTIVES: NATIONAL STUnited States - BUSPROG: Technology ANDARDS: TOPICS: Performing Quantitative Risk Analysis KEYWORDS: Bloom's: Comprehension 16. The Monte Carlo analysis can predict the probability of finishing by a certain date or the probability that the cost will be equal to or less than a certain value. a. True b. Fals e ANSWER: True RATIONALE: Feedback: Monte Carlo analysis simulates a model’s outcome many times to provide a statistical distribution of the calculated results. This analysis can predict the probability of finishing by a certain date or the probability that the cost will be equal to or less than a certain value. POINTS: 1 DIFFICULTY: Difficulty: Moderate REFERENCES p.449 : LEARNING O INFO.SCHW.14.81 - LO: 11-6 BJECTIVES: NATIONAL STUnited States - BUSPROG: Technology ANDARDS: TOPICS: Performing Quantitative Risk Analysis KEYWORDS: Bloom's: Comprehension 17. Identified risks may not materialize, or their probabilities of occurrence or loss may diminish. a. True b. Fals e ANSWER: True RATIONALE: Feedback: Identified risks may not materialize, or their probabilities of occurrence or loss may diminish. Previously identified risks may be determined to have a greater probability of occurrence or a higher estimated loss value. Similarly, new risks will be identified as the project progresses. POINTS: 1 DIFFICULTY: Difficulty: Moderate REFERENCES p.454-455 : LEARNING O INFO.SCHW.14.82 - LO: 11-8 BJECTIVES: Page 7 Chapter 11: Project Risk Management NATIONAL STUnited States - BUSPROG: Technology ANDARDS: TOPICS: Controlling Risks KEYWORDS: Bloom's: Comprehension 18. The risk register can be created with a simple Microsoft Word or Excel file. a. True b. Fals e ANSWER: True RATIONALE: Feedback: The risk register is often a simple Microsoft Word or Excel file, but it can also be part of a more sophisticated database. POINTS: 1 DIFFICULTY: Difficulty: Easy REFERENCES: p.455 LEARNING OBJINFO.SCHW.14.83 - LO: 11-9 ECTIVES: NATIONAL STAUnited States - BUSPROG: Technology NDARDS: TOPICS: KEYWORDS: Using Software To Assist In Project Risk Management Bloom's: Knowledge Multiple Choice 19. Risk utility rises at a decreasing rate for a _____ person. b. risk-averse a. riskseeking c. risk-neutral d. risk-indifferent ANSWER: b RATIONALE: Feedback: Utility rises at a decreasing rate for a risk-averse person. In other words, when more payoff or money is at stake, a person or organization that is risk-averse gains less satisfaction from the risk, or has lower tolerance for the risk. POINTS: 1 DIFFICULTY: Difficulty: Moderate REFERENCES p.431 : LEARNING O INFO.SCHW.14.77 - LO: 11-1 BJECTIVES: NATIONAL STUnited States - BUSPROG: Technology ANDARDS: TOPICS: The Importance Of Project Risk Management KEYWORDS: Bloom's: Knowledge 20. Those who are _____ have a higher tolerance for risk, and their satisfaction increases when more payoff is at stake. a. riskb. risk-averse seeking Page 8 Chapter 11: Project Risk Management c. risk-neutral d. risk-indifferent ANSWER: a RATIONALE: Feedback: Those who are risk-seeking have a higher tolerance for risk, and their satisfaction increases when more payoff is at stake. A risk-seeking person prefers outcomes that are more uncertain and is often willing to pay a penalty to take risks. POINTS: 1 DIFFICULTY: Difficulty: Moderate REFERENCES p.431 : LEARNING O INFO.SCHW.14.77 - LO: 11-1 BJECTIVES: NATIONAL STUnited States - BUSPROG: Technology ANDARDS: TOPICS: The Importance Of Project Risk Management KEYWORDS: Bloom's: Knowledge 21. A _____ person achieves a balance between risk and payoff. b. risk-averse a. riskseeking c. risk-fearing d. riskneutral ANSWER: d RATIONALE: Feedback: A risk-neutral person achieves a balance between risk and payoff. This person would evaluate decisions using a number of factors—risk is just one of them. POINTS: 1 DIFFICULTY: Difficulty: Moderate REFERENCES p. 431 : LEARNING O INFO.SCHW.14.77 - LO: 11-1 BJECTIVES: NATIONAL STUnited States - BUSPROG: Technology ANDARDS: TOPICS: The Importance Of Project Risk Management KEYWORDS: Bloom's: Knowledge 22. _____ involves deciding how to approach and plan the risk management activities for the project. a. Identifying risks b. Planning risk management d. Performing quantitative risk c. Performing qualitative risk analysis analysis ANSWER: b RATIONALE: Feedback: Planning risk management involves deciding how to approach and plan risk management activities for the project. POINTS: 1 DIFFICULTY: Difficulty: Easy Page 9 Chapter 11: Project Risk Management REFERENCES: p.431 LEARNING OBJ INFO.SCHW.14.77 - LO: 11-1 ECTIVES: NATIONAL STAN United States - BUSPROG: Technology DARDS: TOPICS: KEYWORDS: The Importance Of Project Risk Management Bloom's: Knowledge 23. The degree of uncertainty an entity is willing to take on in anticipation of a reward is a. risk b. risk tolerance appetite c. risk utility d. unknown risk ANSWER: a RATIONALE: Feedback: Risk appetite is the degree of uncertainty an entity is willing to take on and risk tolerance is the maximum acceptable deviation an entity is willing to accept. POINTS: 1 DIFFICULTY: Difficulty: Moderate REFERENCES p.431 : LEARNING O INFO.SCHW.14.77 - LO: 11-1 BJECTIVES: NATIONAL STUnited States - BUSPROG: Technology ANDARDS: TOPICS: The Importance Of Project Risk Management KEYWORDS: Bloom's: Knowledge 24. _____ involves determining which risks are likely to affect a project and documenting the characteristics of each. a. Identifying risks b. Planning risk management d. Performing quantitative risk c. Performing qualitative risk analysis analysis ANSWER: a RATIONALE: Feedback: Identifying risks involves determining which risks are likely to affect a project and documenting the characteristics of each. The main output of this process is the start of a risk register. POINTS: 1 DIFFICULTY: Difficulty: Moderate REFERENCES p.432 : LEARNING O INFO.SCHW.14.77 - LO: 11-1 BJECTIVES: NATIONAL STUnited States - BUSPROG: Technology ANDARDS: TOPICS: The Importance Of Project Risk Management KEYWORDS: Bloom's: Knowledge 25. _____ involves prioritizing risks based on their probability and impact of occurrence. Page 10 Chapter 11: Project Risk Management a. Performing qualitative risk analysis c. Planning risk responses b. Identifying risks d. Performing quantitative risk analysis ANSWER: a RATIONALE: Feedback: Performing qualitative risk analysis involves prioritizing risks based on their probability and impact of occurrence. After identifying risks, project teams can use various tools and techniques to rank risks and update information in the risk register. POINTS: 1 DIFFICULTY: Difficulty: Moderate REFERENCES p.432 : LEARNING O INFO.SCHW.14.77 - LO: 11-1 BJECTIVES: NATIONAL STUnited States - BUSPROG: Technology ANDARDS: TOPICS: The Importance Of Project Risk Management KEYWORDS: Bloom's: Knowledge 26. _____ involves numerically estimating the effects of risks on project objectives. b. Planning risk responses a. Performing qualitative risk analysis c. Identifying risks d. Performing quantitative risk analysis ANSWER: d RATIONALE: Feedback: Performing quantitative risk analysis involves numerically estimating the effects of risks on project objectives. POINTS: 1 DIFFICULTY: Difficulty: Moderate REFERENCES: p.432 LEARNING OBJEINFO.SCHW.14.77 - LO: 11-1 CTIVES: NATIONAL STANUnited States - BUSPROG: Technology DARDS: TOPICS: The Importance Of Project Risk Management KEYWORDS: Bloom's: Knowledge 27. _____ involves taking steps to enhance opportunities and reduce threats to meeting project objectives. b. Planning risk responses a. Performing quantitative risk analysis c. Controlling risk d. Performing qualitative risk analysis ANSWER: b RATIONALE: Feedback: Planning risk responses involves taking steps to enhance opportunities and reduce threats to meeting project objectives. POINTS: 1 Page 11 Chapter 11: Project Risk Management DIFFICULTY: Difficulty: Moderate REFERENCES: p.432 LEARNING OBJINFO.SCHW.14.77 - LO: 11-1 ECTIVES: NATIONAL STAUnited States - BUSPROG: Technology NDARDS: TOPICS: KEYWORDS: The Importance Of Project Risk Management Bloom's: Knowledge 28. _____ involves monitoring identified and residual risks, identifying new risks, carrying out risk response plans, and evaluating the effectiveness of risk strategies throughout the life of the project. b. Planning risk responses a. Performing quantitative risk analysis c. Controlling risk d. Performing qualitative risk analysis ANSWER: c RATIONALE: Feedback: Controlling risk involves monitoring identified and residual risks, identifying new risks, carrying out risk response plans, and evaluating the effectiveness of risk strategies throughout the life of the project. POINTS: 1 DIFFICULTY: Difficulty: Moderate REFERENCES p.432 : LEARNING O INFO.SCHW.14.77 - LO: 11-1 BJECTIVES: NATIONAL STUnited States - BUSPROG: Technology ANDARDS: TOPICS: The Importance Of Project Risk Management KEYWORDS: Bloom's: Knowledge 29. _____ are predefined actions that the project team will take if an identified risk event occurs. a. Secondary risks b. Workarounds c. Contingency plans d. Management reserves ANSWER: c RATIONALE: Feedback: Contingency plans are predefined actions that the project team will take if an identified risk event occurs. POINTS: 1 DIFFICULTY: Difficulty: Moderate REFERENCES: p.434 LEARNING OBJE INFO.SCHW.14.84 - LO: 11-2 CTIVES: NATIONAL STANUnited States - BUSPROG: Technology DARDS: TOPICS: KEYWORDS: Planning Risk Management Bloom's: Knowledge Page 12 Chapter 11: Project Risk Management 30. Unenforceable conditions or contract clauses and adversarial relations are risk conditions associated with the project _____ management knowledge area. a. integration b. quality c. procurement d. human resources ANSWER: c RATIONALE: Feedback: Unenforceable conditions or contract clauses, and adversarial relations are risk conditions associated with the project procurement management knowledge area. POINTS: 1 DIFFICULTY: Difficulty: Moderate REFERENCES p.438 : LEARNING O INFO.SCHW.14.78 - LO: 11-3 BJECTIVES: NATIONAL STUnited States - BUSPROG: Technology ANDARDS: TOPICS: Common Sources Of Risk On IT Projects KEYWORDS: Bloom's: Knowledge 31. _____ is a fact-finding technique that can be used for collecting information in face-to-face, phone, e-mail, or instantmessaging discussions. a. Brainstorming b. Monte Carlo analysis d. Interviewing c. The Delphi technique ANSWER: d RATIONALE: Feedback: Interviewing is a fact-finding technique for collecting information in face-to-face, phone, e-mail, or instant-messaging discussions. Interviewing people with similar project experience is an important tool for identifying potential risks. POINTS: 1 DIFFICULTY: Difficulty: Moderate REFERENCES p.439 : LEARNING O INFO.SCHW.14.79 - LO: 11-4 BJECTIVES: NATIONAL STUnited States - BUSPROG: Technology ANDARDS: TOPICS: Identifying Risks KEYWORDS: Bloom's: Knowledge 32. A(n) _____ represents decision problems by displaying essential elements, including decisions, uncertainties, causality, and objectives, and how they influence each other. a. risk breakdown b. influence diagram structure c. process flow chart d. work breakdown Page 13 Chapter 11: Project Risk Management structure ANSWER: b RATIONALE: Feedback: An influence diagram represents decision problems by displaying essential elements, including decisions, uncertainties, causality, and objectives, and how they influence each other. POINTS: 1 DIFFICULTY: Difficulty: Moderate REFERENCES p.440 : LEARNING O INFO.SCHW.14.79 - LO: 11-4 BJECTIVES: NATIONAL STUnited States - BUSPROG: Technology ANDARDS: TOPICS: Identifying Risks KEYWORDS: Bloom's: Knowledge 33. The _____ lists the relative probability of a risk occurring and the relative impact of the risk occurring. a. Top Ten Risk Item Tracking chart b. requirements traceability matrix c. probability/impact matrix d. expectations management matrix ANSWER: c RATIONALE: Feedback: A project manager can chart the probability and impact of risks on a probability/impact matrix or chart, which lists the relative probability of a risk occurring and the relative impact of the risk occurring. POINTS: 1 DIFFICULTY: Difficulty: Moderate REFERENCES p.443 : LEARNING O INFO.SCHW.14.80 - LO: 11-5 BJECTIVES: NATIONAL STUnited States - BUSPROG: Technology ANDARDS: TOPICS: Performing Quantitative Risk Analysis KEYWORDS: Bloom's: Knowledge 34. _____ are/is a qualitative risk analysis tool that maintains an awareness of risks throughout the life of a project in addition to identifying risks. a. SharePoint portal b. Probability/impact matrices or charts c. Expectations management d. Top Ten Risk Item Tracking matrix ANSWER: d RATIONALE: Feedback: Top Ten Risk Item Tracking is a qualitative risk analysis tool. In addition to identifying risks, it maintains an awareness of risks throughout the life of a project by helping to monitor risks. POINTS: 1 DIFFICULTY: Difficulty: Moderate Page 14 Chapter 11: Project Risk Management REFERENCES p.444 : LEARNING O INFO.SCHW.14.80 - LO: 11-5 BJECTIVES: NATIONAL STUnited States - BUSPROG: Technology ANDARDS: TOPICS: Performing Qualitative Risk Analysis KEYWORDS: Bloom's: Knowledge 35. Identifying risks is a subprocess of the _____ process of project risk management. a. planning b. executing d. closing c. monitoring and controlling ANSWER: a RATIONALE: Feedback: Identifying risks is a subprocess of the planning process of project risk management. POINTS: 1 DIFFICULTY: Difficulty: Easy REFERENCES: p.446 LEARNING OBJECTIINFO.SCHW.14.77 - LO: 11-1 VES: NATIONAL STANDAUnited States - BUSPROG: Technology RDS: TOPICS: KEYWORDS: The Importance Of Project Risk Management Bloom's: Knowledge 36. Performing qualitative and quantitative risk analyses are subprocesses of the _____ process of project risk management. a. planning b. executing d. closing c. monitoring and controlling ANSWER: a RATIONALE: Feedback: Performing qualitative and quantitative risk analyses are subprocesses of the planning process of project risk management. POINTS: 1 DIFFICULTY: Difficulty: Easy REFERENCES: p.446 LEARNING OBJINFO.SCHW.14.77 - LO: 11-1 ECTIVES: NATIONAL STAUnited States - BUSPROG: Technology NDARDS: TOPICS: The Importance Of Project Risk Management KEYWORDS: Bloom's: Knowledge 37. A(n) _____ is a diagramming analysis technique used to help select the best course of action in situations in which future outcomes are uncertain. a. decision b. activity-onPage 15 Chapter 11: Project Risk Management tree arrow c. workaround d. backward pass ANSWER: a RATIONALE: Feedback: A decision tree is a diagramming analysis technique used to help select the best course of action when future outcomes are uncertain. A common application of decision tree analysis involves calculating expected monetary value. POINTS: 1 DIFFICULTY: Difficulty: Moderate REFERENCES p.447 : LEARNING O INFO.SCHW.14.81 - LO: 11-6 BJECTIVES: NATIONAL STUnited States - BUSPROG: Technology ANDARDS: TOPICS: Performing Quantitative Risk Analysis KEYWORDS: Bloom's: Knowledge 38. _____ analysis simulates a model’s outcome many times to provide a statistical distribution of the calculated results. a. Sensitivity b. System s d. NPV c. Monte Carlo ANSWER: c RATIONALE: Feedback: Monte Carlo analysis simulates a model’s outcome many times to provide a statistical distribution of the calculated results. POINTS: 1 DIFFICULTY: Difficulty: Moderate REFERENCES: p.449 LEARNING OBJINFO.SCHW.14.81 - LO: 11-6 ECTIVES: NATIONAL STAUnited States - BUSPROG: Technology NDARDS: TOPICS: Performing Quantitative Risk Analysis KEYWORDS: Bloom's: Knowledge 39. What is the first step in a Monte Carlo analysis? a.Determine the probability distribution of each variable. b.For each variable, such as the time estimate for a task, select a random value based on the probability distribution for the occurrence of the variable. c.Assess the range for the variables being considered. d.Run a deterministic analysis or one pass through the model using the combination of values selected for each one of the variables. ANSWER: c RATIONALE: Feedback: Assess the range for the variables being considered. In other words, collect the most likely, optimistic, and pessimistic estimates for the variables in Page 16 Chapter 11: Project Risk Management the model. POINTS: 1 DIFFICULTY: Difficulty: Moderate REFERENCES p.449 : LEARNING O INFO.SCHW.14.81 - LO: 11-6 BJECTIVES: NATIONAL STUnited States - BUSPROG: Technology ANDARDS: TOPICS: Performing Quantitative Risk Analysis KEYWORDS: Bloom's: Comprehension 40. A _____ is a technique used to show the effects of changing one or more variables on an outcome. a. sensitivity analysis b. decision tree c. Monte Carlo d. systems analysis analysis ANSWER: a RATIONALE: Feedback: A sensitivity analysis is a technique used to show the effects of changing one or more variables on an outcome. POINTS: 1 DIFFICULTY: Difficulty: Moderate REFERENCES: p.451 LEARNING OBJ INFO.SCHW.14.81 - LO: 11-6 ECTIVES: NATIONAL STANUnited States - BUSPROG: Technology DARDS: TOPICS: KEYWORDS: Performing Quantitative Risk Analysis Bloom's: Comprehension 41. _____ involves eliminating a specific threat, usually by eliminating its causes. a. Risk avoidance b. Risk acceptance d. Risk mitigation c. Risk transference ANSWER: a RATIONALE: Feedback: Risk avoidance involves eliminating a specific threat, usually by eliminating its causes. POINTS: 1 DIFFICULTY: Difficulty: Moderate REFERENCES: p.452 LEARNING OBJECTINFO.SCHW.14.85 - LO: 11-7 IVES: NATIONAL STANDAUnited States - BUSPROG: Technology RDS: TOPICS: KEYWORDS: Planning Risk Responses Bloom's: Knowledge Page 17 Chapter 11: Project Risk Management 42. _____ involves reducing the impact of a risk event by reducing the probability of its occurrence. a. Risk avoidance b. Risk acceptance d. Risk mitigation c. Risk transference ANSWER: d RATIONALE: Feedback: Risk mitigation involves reducing the impact of a risk event by reducing the probability of its occurrence. POINTS: 1 DIFFICULTY: Difficulty: Moderate REFERENCES: p.453 LEARNING OBJE INFO.SCHW.14.85 - LO: 11-7 CTIVES: NATIONAL STANUnited States - BUSPROG: Technology DARDS: TOPICS: KEYWORDS: Planning Risk Responses Bloom's: Knowledge 43. _____ involves doing whatever you can to make sure the positive risk happens. a. Risk exploitation b. Risk sharing c. Risk d. Risk acceptance enhancement ANSWER: a RATIONALE: Feedback: Risk exploitation involves doing whatever you can to make sure the positive risk happens. POINTS: 1 DIFFICULTY: Difficulty: Moderate REFERENCES: p.453 LEARNING OBJEC INFO.SCHW.14.85 - LO: 11-7 TIVES: NATIONAL STANDA United States - BUSPROG: Technology RDS: TOPICS: Planning Risk Responses KEYWORDS: Bloom's: Knowledge 44. _____ involves shifting the consequence of a risk and responsibility for its management to a third party. a. Risk avoidance b. Risk acceptance c. Risk d. Risk mitigation transference ANSWER: c RATIONALE: Feedback: Risk transference involves shifting the consequence of a risk and responsibility for its management to a third party. POINTS: 1 DIFFICULTY: Difficulty: Moderate Page 18 Chapter 11: Project Risk Management REFERENCES: p.454 LEARNING OBJ INFO.SCHW.14.85 - LO: 11-7 ECTIVES: NATIONAL STAN United States - BUSPROG: Technology DARDS: TOPICS: KEYWORDS: Planning Risk Responses Bloom's: Knowledge 45. _____ involves allocating ownership of the risk to another party. a. Risk exploitation b. Risk sharing d. Risk acceptance c. Risk enhancement ANSWER: b RATIONALE: Feedback: Risk sharing involves allocating ownership of the risk to another party. POINTS: 1 DIFFICULTY: Difficulty: Moderate REFERENCES: p.454 LEARNING OBJECTIV INFO.SCHW.14.85 - LO: 11-7 ES: NATIONAL STANDARDUnited States - BUSPROG: Technology S: TOPICS: KEYWORDS: Planning Risk Responses Bloom's: Knowledge 46. _____ involves changing the size of the opportunity by identifying and maximizing key drivers of the positive risk. a. Risk exploitation b. Risk sharing c. Risk d. Risk acceptance enhancement ANSWER: c RATIONALE: Feedback: Risk enhancement involves changing the size of the opportunity by identifying and maximizing key drivers of the positive risk. POINTS: 1 DIFFICULTY: Difficulty: Moderate REFERENCES: p.454 LEARNING OB INFO.SCHW.14.85 - LO: 11-7 JECTIVES: NATIONAL STAUnited States - BUSPROG: Technology NDARDS: TOPICS: Planning Risk Responses KEYWORDS: Bloom's: Knowledge 47. _____ applies to positive risks when the project team cannot or chooses not to take any actions toward a risk. b. Risk acceptance a. Risk enhancement c. Risk sharing d. Risk Page 19 Chapter 11: Project Risk Management exploitation b Feedback: Risk acceptance applies to positive risks when the project team cannot or chooses not to take any actions toward a risk. POINTS: 1 DIFFICULTY: Difficulty: Moderate REFERENCES: p.454 LEARNING OBJINFO.SCHW.14.85 - LO: 11-7 ECTIVES: NATIONAL STAUnited States - BUSPROG: Technology NDARDS: ANSWER: RATIONALE: TOPICS: KEYWORDS: Planning Risk Responses Bloom's: Knowledge 48. _____ risks refer to those that are direct results of implementing risk responses. b. Primary a. Architectura l c. Residual d. Secondary ANSWER: d RATIONALE: Feedback: Secondary risks are a direct result of implementing a risk response. POINTS: 1 DIFFICULTY: Difficulty: Moderate REFERENCES: p.454 LEARNING OBJECTIVEINFO.SCHW.14.85 - LO: 11-7 S: NATIONAL STANDARDS United States - BUSPROG: Technology : TOPICS: KEYWORDS: Planning Risk Responses Bloom's: Knowledge 49. _____ are unplanned responses to risk events used when project teams do not have contingency plans in place. a. Workarounds b. Fallback plans c. Contingency plans d. Triggers ANSWER: a RATIONALE: Feedback: Workarounds are unplanned responses to risk events used when project teams do not have contingency plans in place. POINTS: 1 DIFFICULTY: Difficulty: Moderate REFERENCES: p.454 LEARNING OBJINFO.SCHW.14.82 - LO: 11-8 ECTIVES: NATIONAL STAUnited States - BUSPROG: Technology NDARDS: TOPICS: Controlling Risks Page 20 Chapter 11: Project Risk Management KEYWORDS: Bloom's: Knowledge Completion 50. Potential problems that might occur on the project and how they might impede project success are _____ risks. ANSWER: negative POINTS: 1 DIFFICULTY: Difficulty: Easy REFERENCES: p.429 LEARNING OBJECTIVES: INFO.SCHW.14.77 - LO: 11-1 NATIONAL STANDARDS: United States - BUSPROG: Technology TOPICS: The Importance Of Project Risk Management KEYWORDS: Bloom's: Knowledge 51. A project _____ is an uncertainty that can have a negative or positive effect on meeting project objectives. ANSWER: risk POINTS: 1 DIFFICULTY: Difficulty: Easy REFERENCES: p.429 LEARNING OBJECTIVES: INFO.SCHW.14.77 - LO: 11-1 NATIONAL STANDARDS: United States - BUSPROG: Technology TOPICS: The Importance Of Project Risk Management KEYWORDS: Bloom's: Knowledge 52. _____ is the amount of satisfaction or pleasure received from a potential payoff. ANSWER: Risk utility POINTS: 1 DIFFICULTY: Difficulty: Moderate REFERENCES: p.431 LEARNING OBJECTIVES: INFO.SCHW.14.77 - LO: 11-1 NATIONAL STANDARDS: United States - BUSPROG: Technology TOPICS: The Importance Of Project Risk Management KEYWORDS: Bloom's: Knowledge 53. Risk utility rises at a decreasing rate for a(n) _____ person. ANSWER: risk-averse POINTS: 1 DIFFICULTY: Difficulty: Moderate REFERENCES: p.431 LEARNING OBJECTIVES: INFO.SCHW.14.77 - LO: 11-1 NATIONAL STANDARDS: United States - BUSPROG: Technology TOPICS: The Importance Of Project Risk Page 21 Chapter 11: Project Risk Management KEYWORDS: Management Bloom's: Knowledge 54. The term _____ is used to describe risks that the project team has identified and analyzed. ANSWER: known risks POINTS: 1 DIFFICULTY: Difficulty: Moderate REFERENCES: p.431 LEARNING OBJECTIVES: INFO.SCHW.14.77 - LO: 11-1 NATIONAL STANDARDS: United States - BUSPROG: Technology TOPICS: The Importance Of Project Risk Management KEYWORDS: Bloom's: Knowledge 55. The main output of the _____ process is the start of a risk register. ANSWER: identifying risks POINTS: 1 DIFFICULTY: Difficulty: Easy REFERENCES: p.432 LEARNING OBJECTIVES: INFO.SCHW.14.77 - LO: 11-1 NATIONAL STANDARDS: United States - BUSPROG: Technology TOPICS: The Importance Of Project Risk Management KEYWORDS: Bloom's: Knowledge 56. A(n) _____ documents the procedures for managing risk throughout the project. ANSWER: risk management plan POINTS: 1 DIFFICULTY: Difficulty: Moderate REFERENCES: p.433 LEARNING OBJECTIVES: INFO.SCHW.14.84 - LO: 11-2 NATIONAL STANDARDS: United States - BUSPROG: Technology TOPICS: Planning Risk Management KEYWORDS: Bloom's: Knowledge 57. A(n) _____ is a hierarchy of potential risk categories for a project. ANSWER: risk breakdown structure POINTS: 1 DIFFICULTY: Difficulty: Moderate REFERENCES: p.437 LEARNING OBJECTIVES: INFO.SCHW.14.78 - LO: 11-3 NATIONAL STANDARDS: United States - BUSPROG: Technology TOPICS: Common Sources Of Risk On IT Projects KEYWORDS: Bloom's: Knowledge Page 22 Chapter 11: Project Risk Management 58. _____ is the process of understanding what potential events might hurt or enhance a particular project. ANSWER: Contingency reserves Contingency allowances POINTS: 1 DIFFICULTY: Difficulty: Easy REFERENCES: p.438 LEARNING OBJECTIVES: INFO.SCHW.14.79 - LO: 11-4 NATIONAL STANDARDS: United States - BUSPROG: Technology TOPICS: Planning Risk Management KEYWORDS: Bloom's: Knowledge 59. _____ is a technique by which a group attempts to generate ideas or find a solution for a specific problem by amassing ideas spontaneously and without judgment. ANSWER: Brainstorming POINTS: 1 DIFFICULTY: Difficulty: Easy REFERENCES: p.439 LEARNING OBJECTIVES: INFO.SCHW.14.79 - LO: 11-4 NATIONAL STANDARDS: United States - BUSPROG: Technology TOPICS: Identifying Risks KEYWORDS: Bloom's: Knowledge 60. The basic concept of the _____ technique is to derive a consensus among a panel of experts who make predictions about future developments. ANSWER: Delphi POINTS: 1 DIFFICULTY: Difficulty: Easy REFERENCES: p.439 LEARNING OBJECTIVES: INFO.SCHW.14.79 - LO: 11-4 NATIONAL STANDARDS: United States - BUSPROG: Technology TOPICS: Identifying Risks KEYWORDS: Bloom's: Knowledge 61. System or process _____ are diagrams that show how different parts of a system interrelate. ANSWER: flowcharts POINTS: 1 DIFFICULTY: Difficulty: Moderate REFERENCES: p.440 LEARNING OBJECTIVES: INFO.SCHW.14.79 - LO: 11-4 NATIONAL STANDARDS: United States - BUSPROG: Technology TOPICS: Identifying Risks KEYWORDS: Bloom's: Knowledge 62. A(n) _____ is a document that contains results of various risk management processes. ANSWER: risk register Page 23 Chapter 11: Project Risk Management POINTS: 1 DIFFICULTY: Difficulty: Moderate REFERENCES: p.440 LEARNING OBJECTIVES: INFO.SCHW.14.79 - LO: 11-4 NATIONAL STANDARDS: United States - BUSPROG: Technology TOPICS: Identifying Risks KEYWORDS: Bloom's: Knowledge 63. _____ are indicators or symptoms of actual risk events. ANSWER: Triggers POINTS: 1 DIFFICULTY: Difficulty: Moderate REFERENCES: p.441 LEARNING OBJECTIVES: INFO.SCHW.14.79 - LO: 11-4 NATIONAL STANDARDS: United States - BUSPROG: Technology TOPICS: Identifying Risks KEYWORDS: Bloom's: Knowledge 64. The _____ is the person who will own or take responsibility for the risk. ANSWER: risk owner POINTS: 1 DIFFICULTY: Difficulty: Easy REFERENCES: p.442 LEARNING OBJECTIVES: INFO.SCHW.14.79 - LO: 11-4 NATIONAL STANDARDS: United States - BUSPROG: Technology TOPICS: Identifying Risks KEYWORDS: Bloom's: Knowledge 65. _____ are numbers that represent the overall risk of specific events, based on their probability of occurring and the consequences to the project if they do occur. ANSWER: Risk factors POINTS: 1 DIFFICULTY: Difficulty: Moderate REFERENCES: p.444 LEARNING OBJECTIVES: INFO.SCHW.14.80 - LO: 11-5 NATIONAL STANDARDS: United States - BUSPROG: Technology TOPICS: Performing Qualitative Risk Analysis KEYWORDS: Bloom's: Knowledge 66. The main output of qualitative risk analysis is updating the ________. . ANSWER: risk register POINTS: 1 DIFFICULTY: Difficulty: Moderate REFERENCES: p.445 Page 24 Chapter 11: Project Risk Management LEARNING OBJECTIVES: INFO.SCHW.14.80 - LO: 11-5 NATIONAL STANDARDS: United States - BUSPROG: Technology TOPICS: Performing Qualitative Risk Analysis KEYWORDS: Bloom's: Knowledge 67. A(n) _____ is a list of risks that are low priority, but are still identified as potential risks. ANSWER: watch list POINTS: 1 DIFFICULTY: Difficulty: Moderate REFERENCES: p.446 LEARNING OBJECTIVES: INFO.SCHW.14.80 - LO: 11-5 NATIONAL STANDARDS: United States - BUSPROG: Technology TOPICS: Performing Qualitative Risk Analysis KEYWORDS: Bloom's: Knowledge 68. _____ is the product of a risk event probability and the risk event’s monetary value. ANSWER: EMV Expected monetary value Expected monetary value (EMV) EMV (Expected monetary value) POINTS: 1 DIFFICULTY: Difficulty: Moderate REFERENCES: p.447 LEARNING OBJEC INFO.SCHW.14.81 - LO: 11-6 TIVES: NATIONAL STANDUnited States - BUSPROG: Technology ARDS: TOPICS: KEYWORDS: Performing Quantitative Risk Analysis Bloom's: Knowledge 69. _____ are provisions held by the project sponsor or organization to reduce the risk of cost or schedule overruns to an acceptable level. ANSWER: Contingency reserves Contingency allowances POINTS: 1 DIFFICULTY: Difficulty: Easy REFERENCES: p.448 LEARNING OBJECTIVES: INFO.SCHW.14.84 - LO: 11-2 NATIONAL STANDARDS: United States - BUSPROG: Technology TOPICS: Planning Risk Management KEYWORDS: Bloom's: Knowledge 70. _____ helps professionals to see the effects of changing one or more variables on an outcome. ANSWER: Sensitivity analysis POINTS: 1 DIFFICULTY: Difficulty: Moderate Page 25 Chapter 11: Project Risk Management REFERENCES: p.451 LEARNING OBJECTIVES: INFO.SCHW.14.81 - LO: 11-6 NATIONAL STANDARDS: United States - BUSPROG: Technology TOPICS: Performing Quantitative Risk Analysis KEYWORDS: Bloom's: Comprehension 71. _____ involves accepting the consequences should a risk occur. ANSWER: Risk acceptance POINTS: 1 DIFFICULTY: Difficulty: Moderate REFERENCES: p.453 LEARNING OBJECTIVES: INFO.SCHW.14.85 - LO: 11-7 NATIONAL STANDARDS: United States - BUSPROG: Technology TOPICS: Planning Risk Responses KEYWORDS: Bloom's: Knowledge 72. Risk _____ refers to reducing the impact of a risk event by reducing the probability of its occurrence. ANSWER: mitigation POINTS: 1 DIFFICULTY: Difficulty: Moderate REFERENCES: p.453 LEARNING OBJECTIVES: INFO.SCHW.14.85 - LO: 11-7 NATIONAL STANDARDS: United States - BUSPROG: Technology TOPICS: Planning Risk Responses KEYWORDS: Bloom's: Knowledge 73. _____ risks are risks that remain after all of the response strategies have been implemented. ANSWER: Residual POINTS: 1 DIFFICULTY: Difficulty: Moderate REFERENCES: p.454 LEARNING OBJECTIVES: INFO.SCHW.14.85 - LO: 11-7 NATIONAL STANDARDS: United States - BUSPROG: Technology TOPICS: Planning Risk Responses KEYWORDS: Bloom's: Knowledge 74. Project teams sometimes use _____, which are unplanned responses to risk events, when they do not have contingency plans in place. ANSWER: workarounds POINTS: 1 DIFFICULTY: Difficulty: Moderate REFERENCES: p.455 LEARNING OBJECTIVES: INFO.SCHW.14.82 - LO: 11-8 NATIONAL STANDARDS: United States - BUSPROG: Technology Page 26 Chapter 11: Project Risk Management TOPICS: KEYWORDS: Controlling Risks Bloom's: Knowledge Essay 75. List and briefly describe the six major processes involved in risk management. ANSWER: Planning risk management involves deciding how to approach and plan the risk management activities for the project. By reviewing the project management plan, project charter, stakeholder register, enterprise environmental factors, and organizational process assets, project teams can discuss and analyze risk management activities for their particular projects. The main output of this process is a risk management plan. Identifying risks involves determining which risks are likely to affect a project and documenting the characteristics of each. The main output of this process is the start of a risk register. Performing qualitative risk analysis involves prioritizing risks based on their probability and impact of occurrence. After identifying risks, project teams can use various tools and techniques to rank risks and update information in the risk register. The main outputs are project documents updates. Performing quantitative risk analysis involves numerically estimating the effects of risks on project objectives. The main outputs of this process are project documents updates. Planning risk responses involves taking steps to enhance opportunities and reduce threats to meeting project objectives. Using outputs from the preceding risk management processes, project teams can develop risk response strategies that often result in updates to project management plan and other project documents. Controlling risk involves monitoring identified and residual risks, identifying new risks, carrying out risk response plans, and evaluating the effectiveness of risk strategies throughout the life of the project. The main outputs of this process include work performance information, change requests, and updates to the project management plan, other project documents, and organizational process assets. POINTS: 1 DIFFICULTY: Difficulty: Moderate REFERENCES p.431-432 : LEARNING O INFO.SCHW.14.77 - LO: 11-1 BJECTIVES: NATIONAL STUnited States - BUSPROG: Technology ANDARDS: TOPICS: The Importance Of Project Risk Management KEYWORDS: Bloom's: Knowledge 76. List and briefly describe four methods for identifying risks. Page 27 Chapter 11: Project Risk Management ANSWER: Brainstorming is a technique by which a group attempts to generate ideas or find a solution for a specific problem by amassing ideas spontaneously and without judgment. This approach can help the group create a comprehensive list of risks to address later in the qualitative and quantitative risk analysis processes. An experienced facilitator should run the brainstorming session and introduce new categories of potential risks to keep the ideas flowing. After the ideas are collected, the facilitator can group and categorize the ideas to make them more manageable. Delphi technique: An approach to gathering information that helps prevent some of the negative group affects found in brainstorming is the Delphi Technique. The basic concept of the Delphi Technique is to derive a consensus among a panel of experts who make predictions about future developments. The Delphi Technique uses repeated rounds of questioning and written responses, including feedback to earlier-round responses, to take advantage of group input, while avoiding the biasing effects possible in oral panel deliberations. To use the Delphi Technique, you must select a panel of experts for the particular area in question. Interviewing: Interviewing is a fact-finding technique for collecting information in face-to-face, phone, e-mail, or instant-messaging discussions. Interviewing people with similar project experience is an important tool for identifying potential risks. Root cause analysis: It is not uncommon for people to identify problems or opportunities without really understanding them. Before suggesting courses of action, it is important to identify the root cause of a problem or opportunity. Root cause analysis often results in identifying even more potential risks for a project. SWOT analysis: Another technique is a SWOT analysis of strengths, weaknesses, opportunities, and threats, which is often used in strategic planning. SWOT analysis can also be used during risk identification by having project teams focus on the broad perspectives of potential risks for particular projects. Applying SWOT to specific potential projects can help identify the broad risks and opportunities that apply in that scenario. Three other techniques for risk identification include the use of checklists, analysis of assumptions, and creation of diagrams. POINTS: 1 DIFFICULTY: Difficulty: Moderate REFERENCES p.439-440 : LEARNING O INFO.SCHW.14.79 - LO: 11-4 BJECTIVES: NATIONAL STUnited States - BUSPROG: Technology ANDARDS: TOPICS: Identifying Risks KEYWORDS: Bloom's: Comprehension 77. Explain decision trees and expected monetary value. ANSWER: A decision tree is a diagramming analysis technique used to help select the best course of action in situations in which future outcomes are uncertain. A common Page 28 Chapter 11: Project Risk Management application of decision tree analysis involves calculating expected monetary value. Expected monetary value (EMV) is the product of a risk event probability and the risk event’s monetary value. To create a decision tree, and to calculate expected monetary value specifically, you must estimate the probabilities, or chances, of certain events occurring. Probabilities are normally determined based on expert judgment. To calculate the expected monetary value (EMV) for each project, multiply the probability by the outcome value for each potential outcome for each project and sum the results. Because the EMV provides an estimate for the total dollar value of a decision, you want to have a positive number; the higher the EMV, the better. Using EMV helps account for all possible outcomes and their probabilities of occurrence, thereby reducing the tendency to pursue overly aggressive or conservative risk strategies. POINTS: 1 DIFFICULTY: Difficulty: Moderate REFERENCES p.447-448 : LEARNING O INFO.SCHW.14.81 - LO: 11-6 BJECTIVES: NATIONAL STUnited States - BUSPROG: Technology ANDARDS: TOPICS: Performing Qualitative Risk Analysis KEYWORDS: Bloom's: Knowledge 78. Explain the basic steps involved in performing a Monte Carlo analysis. ANSWER: (1) Assess the range for the variables being considered. In other words, collect the most likely, optimistic, and pessimistic estimates for the variables in the model. For example, if you are trying to determine the likelihood of meeting project schedule goals, the project network diagram would be your model. You would collect the most likely, optimistic, and pessimistic time estimates for each task. This step is similar to collecting data for performing PERT estimates. However, instead of applying the same PERT weighted average formula, you go on to the following steps when performing a Monte Carlo simulation. (2) Determine the probability distribution of each variable. What is the likelihood of that variable falling between the optimistic and most likely estimates? For example, if an expert assigned to do a particular task provides a most likely estimate of ten weeks, an optimistic estimate of eight weeks, and a pessimistic estimate of fifteen weeks, you then ask what the probability is of completing that task between eight and ten weeks. The expert might respond that there is a 20 percent probability. (3) For each variable, such as the time estimate for a task, select a random value based on the probability distribution for the occurrence of the variable. For example, using the above scenario, you would randomly pick a value between eight weeks and ten weeks 20 percent of the time and a value between ten weeks and fifteen weeks 80 percent of the time. (4) Run a deterministic analysis or one pass through the model using the combination of values selected for each one of the variables. For example, the Page 29 Chapter 11: Project Risk Management one task described above might have a value of 12 on the first run. All of the other tasks would have one random value assigned to them on that first run, also, based on their estimates and probability distributions. (5) Repeat Steps 3 and 4 many times to obtain the probability distribution of the model’s results. The number of iterations depends on the number of variables and the degree of confidence required in the results, but it typically lies between 100 and 1,000. Using the project schedule as an example, the final simulation results will show you the probability of completing the entire project within a certain time period. POINTS: 1 DIFFICULTY: Difficulty: Moderate REFERENCES p.449 : LEARNING O INFO.SCHW.14.81 - LO: 11-6 BJECTIVES: NATIONAL STUnited States - BUSPROG: Technology ANDARDS: TOPICS: Performing Quantitative Risk Analysis KEYWORDS: Bloom's: Knowledge 79. What are the four basic response strategies for negative risks? Describe each strategy. ANSWER: (1) Risk avoidance or eliminating a specific threat, usually by eliminating its causes. Of course, not all risks can be eliminated, but specific risk events can be. For example, a project team may decide to continue using a specific piece of hardware or software on a project because they know it works. Other products that could be used on the project may be available, but if the project team is unfamiliar with them, they could cause significant risk. Using familiar hardware or software eliminates this risk. (2) Risk acceptance or accepting the consequences should a risk occur. For example, a project team planning a big project review meeting could take an active approach to risk by having a contingency or backup plan and contingency reserves if they cannot get approval for a specific site for the meeting. On the other hand, they could take a passive approach and accept whatever facility their organization provides. (3) Risk transference or shifting the consequence of a risk and responsibility for its management to a third party. For example, risk transference is often used in dealing with financial risk exposure. A project team may purchase special insurance or warranty protection for specific hardware needed for a project. If the hardware fails, the insurer must replace it within an agreed-upon period of time. POINTS: (4) Risk mitigation or reducing the impact of a risk event by reducing the probability of its occurrence. Suggestions for reducing common sources of risk on information technology projects were provided at the beginning of this chapter. Other examples of risk mitigation include using proven technology, having competent project personnel, using various analysis and validation techniques, and buying maintenance or service agreements from subcontractors. 1 Page 30 Chapter 11: Project Risk Management DIFFICULTY: Difficulty: Moderate REFERENCES p.452-453 : LEARNING O INFO.SCHW.14.85 - LO: 11-7 BJECTIVES: NATIONAL STUnited States - BUSPROG: Technology ANDARDS: TOPICS: Planning Risk Responses KEYWORDS: Bloom's: Knowledge Page 31