Risk Management

PM Milestone Project Management Templates

PM Milestone 7000 Project Management Templates

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1. A project manager discovers that there is a part of the project that contains some risk. His strategy with this risk is to subcontract the work to an outside supplier by using a firm fixed-price contract. Which of the following must the project manager do?

a. The project manager should make certain that the project team does not reveal the risk to the supplier until the contract is signed.

b. The project manager should make every effort to make sure that the supplier is made aware of the risk after the contract is signed.

c. The project manager should make sure that the supplier understands the risk before the contract is signed.

d. The project manager should assign a member of the project team to monitor the activity of the supplier to make sure that the supplier deals with the risk properly if it occurs.

2. A project manager is faced with making a decision about a risk that the team has identified. The risk involves the design of a bicycle. It has been found that the neck of the bicycle, where the steering bearing is located and the two supporting bars of the frame come together, will corrode in a high salt environment. If this takes place the neck may fail and injure the rider. The project team decides that the design of the bicycle should be modified by using corrosion resistant materials in the design of the neck. This will eliminate the risk from consideration. This technique is called:

a. Risk avoidance.

b. Risk acceptance.

c. Risk rejection.

d. Risk deflection.

3. A problem occurs in the design of a grocery cart. In this case it is determined that the wheels will wear out much quicker in areas of heavy snow and ice because the salt will corrode the wheel bearings. Using sealed bearing wheels will significantly increase cost, and it is determined that the carts themselves will be rusty and damaged at about the same time the wheel bearings begin to fail. By injecting the wheel bearings with a high temperature grease the life of the wheel bearings is increased considerably. The project recommends using the high temperature grease. This is called:

a. Risk acceptance.

b. Risk avoidance.

c. Risk mitigation.

d. Risk deflection.

4. The contingency budget will:

a. Reduce the probability of scope changes.

b. Reduce the probability of cost overruns.

c. Increase the probability of a cost overrun.

d. Increase the probability of scope changes.

5. A risk has four possible outcomes. Given the following information, what is the expected value of this risk?

Probability

Result of Risk

0.4

-10,000

0.3

-7,500

0.2

-5,000

0.1

+ 2,500

a.

-$20,000

b.

-$14,500

c.

$7,000

d.

- $7,000

6. The project has done its risk analysis. In the process of risk identification the project team has determined that there are risks that will probably happen that have not been identified or evaluated except by noting that other projects of this type have historically had a certain amount of risk discussed in the lessons learned of the project. This project team should set aside money to handle these risks in which financial category?

a. Risk management fund b. Contingency budget c. Management reserve d. Emergency fund

7. A project manager observes that in one part of the project several activities are being completed late. All of these activities have several days of free float associated with them. These are early warnings of the risk that the project will be late in completion. They are called:

a. Risk triggers.

b. Warning messages.

c. Risk forecasts.

d. Schedule risks.

8. The effect of risk on schedule dates for the project creates an array of dates that are possible for project completion. In a typical project the most likely date for the project will have which of the following relationships with the expected value for the project completion date?

a. The most likely date will be earlier than the expected value date.

b. The most likely date will be later than the expected value date.

c. Both dates will have the same likelihood.

d. The most likely date and the expected value date will occur at the same time.

9. A project manager is reviewing the risks of her project. One of the risks she is reviewing has an impact of $25,000 and an associated probability of 10%. The risk is associated with an activity that is the predecessor to seven other activities in the schedule. All eight activities are on the critical path. The seven other activities have a budget of $75,000. What is the expected value of this risk?

10. In probability theory, what is the probability that if you roll two dice (cubes with consecutive numbers 1 to 6 on each of the six faces) you will have at least one 6?

11. A project manager is looking at the risk associated with the project schedule. Realizing that if the risks occur the project will be delivered to the stakeholders late, the project manager decides to consider the risk and promise delivery later than the most likely project completion date. He then takes the time between the promise date and the most likely completion date and distributes it among the activities of the project schedule. This creates float in the schedule. This process is called:

a. Schedule delay.

b. Critical chain scheduling.

c. Buffering.

d. Contingency scheduling.

12. A project manager wants to give some guidelines to the project team as to how risk events should be described. Which of the following items would not be appropriate in describing a risk event?

a. Probability that the risk will occur b. The cost of the risk should it occur c. Expected timing of the risk when it is expected to occur d. The client's outsourcing method

13. A project manager and her project team are analyzing risk in their project. One of the things that they might do to help identify potential risks or opportunities would be to review:

a. The project budget.

b. The goals and objectives of the project.

c. Lessons learned from other similar projects.

d. The monetary value of changes for similar projects.

14. A project manager holds the first risk meeting of the project team. The client is present at the meeting. At the meeting several risks are identified and assigned to members of the project team for evaluation and quantification. The result of the meeting is:

a. Expected value of the risk events.

b. Strategies for the risk events.

c. A list of potential risk events.

d. General statements about risks for the project.

15. In the Monte Carlo technique, what is the criticality index?

a. The number of days the project will be late divided by the project duration b. The percent of time a given activity will be on the critical path c. The percent of time an activity will be late d. The sum of the duration of the critical path activities divided by the project expected value for duration

16. The management reserve for the project contains:

a. Money to offset missing cost objectives.

b. Money to offset missing schedule objectives.

c. Money to offset missing cost or schedule objectives.

d. Money to handle the effects of known risks in the project.

17. A project manager uses the breakeven point to justify his project. He presents this as a justification for buying a new machine. What risk does the project manager run by using this technique to justify buying a new machine for his company?

a. Breakeven point will favor buying a cheap, low-quality machine.

b. Breakeven point will favor buying a machine that is too expensive for the work required.

c. The company may not have the funds to buy the machine in spite of the justification.

d. The machine may not be available because the justification method takes a long time to calculate.

18. Goldratt's critical chain theory says that in order to reduce risk in schedules we should:

a. Start activities in the feeder chains as early as possible.

b. Start activities in the feeder chains as late as possible.

c. Start activities in the critical chains as early as possible.

d. Add buffer to the critical chains.

19. In managing the risk of the project schedule we are managing the risk that the project will not be delivered or completed on time. If we assume that the project's possible completion dates are normally distributed and we promise the client the most likely of the project's possible completion dates, what is the probability that the project will be delivered late?

20. A risk event in a project is something that can have an effect on the project:

a. For the better only, a positive effect.

b. For the worse, a negative effect.

c. Both better or worse, a positive or negative effect.

d. Neither better nor worse, neither a positive nor a negative effect.

21. The project team has put together a project plan for a project, and the plan has been approved by the stakeholders. The customer asks the project manager if the project can be delivered seven weeks sooner. The customer offers sufficient monetary incentive for the project manager. The project manager decides to fast track the project. This decision will:

a. Increase risk.

b. Decrease risk.

c. Not affect risk.

d. Risk change cannot be determined.

22. A project team evaluates risk in the project. As an outcome there are some positive and negative risks that are identified and evaluated. To evaluate the worst case for the project the project team should evaluate and summarize:

a. All of the risks affecting the project.

b. Only the negative risks.

c. The negative risks minus the positive risks.

d. The positive risks minus the negative risks.

23. The Project Management Institute decided to hold its annual meeting in New Orleans, Louisiana. This conference represents a substantial amount of PMI's operating budget for the year. PMI identified a risk of hurricanes during the month of September, when the conference was to be held. PMI decided to purchase convention insurance to offset the loss of convention revenue if a hurricane caused cancellation of the conference. This is a risk management strategy called:

a. Avoidance.

b. Deflection.

c. Acceptance.

d. Mitigation.

24. During the project life cycle, in which part of the life cycle will risk be the lowest?

a. Initiation b. Planning c. Execution d. Closeout

25. The Monte Carlo technique can be used to:

a. Determine the amount of contingency budget needed for the project.

b. Determine the amount of the management reserve.

c. Determine the criticality index for an activity in the schedule.

d. Determine the risk index for a risk in the project.

26. Three activities are done in sequence. Each activity takes five days to do. There is a 90% probability that each activity will be completed on time and a 10% probability that each activity will be finished late. What is the probability that the last of the three activities will be finished on time?

27. The project manager has critical parts that are needed for the project. If the first order of parts is delivered late, the project will be late delivering a critical deliverable to the customer. The seller that has been selected to make these parts for the project has been used in the past and historically has failed to deliver on time 10% of the time. Another vendor can be found that has the same delivery record. The project manager decides to divide the order between the two vendors in hopes that at least one of them will deliver on time. What is the probability that at least one of the vendors will deliver on time?

28. The creative process used to optimize the life cycle costs, save time, increase profits, improve quality, expand market share, solve problems, or use resources more effectively is called:

a. Systems engineering.

b. Value engineering.

c. Project management.

d. Cost management.

29. A project manager is managing a project where a risk occurs. There is no plan to respond to this risk. The response to a negative risk event that has no plan is called:

a. Repair order.

b. Workaround.

c. Risk mitigation.

d. Risk deflection.

30. A project's schedule completion dates are distributed in an even probability distribution. The earliest that the project can be completed is June 1. The latest the project can be completed is June 29. What is the most likely date for project completion?

b. June 29

c. June 15

d. There is no most likely date in an even distribution.

31. When using PERT analysis on a project schedule, probabilistic or expected durations are used for activity durations. If there is a concern that the critical path may shift due to durations changing within the expected range, what technique can be used?

b. Monte Carlo c. Decision trees d. Finite element analysis

32. A project manager is dealing with risk analysis on a software development project. There is a risk that the module that creates the most important report that the system will create will not work properly and will require 200 person-hours to correct. The project manager decides to do nothing about this risk. Which of the following risk strategies is the project manager employing?

a. Acceptance b. Avoidance c. Mitigation d. Deflection

33. The project manager of a large project meets several times with the client for the project. During the meeting the project manager judges that the client has a very low risk tolerance. This means that the client will probably:

a. Be willing to take large risks to make large profits.

b. Be unwilling to take large risks to make large profits.

c. Understand when risks happen on the project.

d. Not understand when risks happen on the project.

34. Monte Carlo analysis can best be described as:

a. A deterministic scheduling method.

b. A probabilistic scheduling simulation method.

c. A probabilistic cost management technique.

d. A risk identification technique.

35. A project manager decides to create a model to represent the project risks. The model translates the uncertainties specified at a detailed level into their potential impact and probabilities. This technique is called a:

a. Risk model.

b. Simulation.

c. Computer risk program.

d. Decision tree.

36. A project manager managing any project should perform risk analysis with his or her project team:

a. Just before any major meeting with the client.

b. On a regular basis throughout the project.

c. Only when justified by the awareness of new risks becoming a possibility.

d. When preparing the project plan.

37. A project manager working on a large project finds that there are several risks that have a severity that is higher than the acceptable risk tolerance. They cannot be avoided or deflected. The project manager will need to use which of the following approaches?

a. Change the risk tolerance of the client b. Buy insurance for the risk c. Ignore the risk d. Mitigate the risk

38. The project manager of a project evaluates the risks of the project by assessing the probability of the risk by categorizing the risks as likely or not likely and assesses their impact as high impact, medium impact, or low impact. This would be which type of risk assessment?

a. Quantitative b. Qualitative c. General d. Characteristic

39. A project manager must make a decision about a risk in his project. He examines the extent to which the uncertainty of each of the elements of the project affects the objective being examined when all other uncertain elements are held at their baseline values. This technique is called which of the following?

a. Decision tree analysis b. Expected value analysis c. Sensitivity analysis d. Simulation

40. A project manager is doing risk analysis with the project team members. They are concerned about evaluating the risks in such a way that the risks will be ranked according to their severity in relation to the project. What method should be used to rank the risks in the order of importance?

a. Determine the expected value b. Determine the cost of the impact c. Determine the probability d. Use subjective analysis

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