224818618-Chap-007

Chapter 07 - Managing Risk

Chapter 07 Managing Risk Multiple Choice Questions

1. An uncertain event or condition that, if it occurs, has a positive or negative effect on a project objectives is termed. A. Random chance . A disaster C. Risk !. "a#ard $. ad %uck

&. 'he chances of a risk event occurring as a project proceeds through its %ife c(c%e tends to A. )%o*%( rise . !rop sharp%( and then %eve% out C. Rise sharp%( and then %eve% out !. Remain about the same $. )%o*%( drop

+. 'he cost impact of a risk event occurring as a project proceeds through its %ife c(c%e tends to A. )%o*%( rise . !rop sharp%( and then %eve% out C. Rise sharp%( and then %eve% out !. Remain about the same $. )%o*%( drop

. 'he attempt to recogni#e and manage potentia% and unforeseen troub%e spots that ma( occur *hen a project is imp%emented is kno*n as A. Risk forecasting . Risk management C. Contingenc( p%anning !. )cenario ana%(sis $. !isaster protection


. hich of the fo%%o*ing is not one of the steps in the risk management process/ A. Risk response deve%opment . Risk assessment C. Risk identification !. Risk tracking $. Risk response contro%

. 'he initia% step in the risk management process is to A. !etermine the %eve% of acceptab%e risk . Assess the risk potentia% C. dentif( the risks !. )et aside budget funds for managing the risks $. Appoint a risk manager

7. 2ne common mistake made ear%( in the risk identification process is to A. 3ot a%% possibi%ities p ossibi%ities are considered . 4articipants are over-optimistic C. 4articipants are over-pessimistic !. 5ocus on objectives and not on the events that cou%d produce conse6uences. $. 'oo much attention is given to past events

. n the beginning the focus of risk management shou%d be on risks that A. mpact the *ho%e project . mpact the critica% path C. Are kno*n !. "ave the greatest cost impact $. "ave the greatest schedu%e impact

8. 'he 1888 3A)A Mars C%imate 2rbiter is an e9amp%e of A. !isaster avoidance through proactive risk management . Murph(:s ;a* C. 4roper use of critica% thinking !. Mismanaged risk contro% $.

. hich of the fo%%o*ing is not one of the steps in the risk management process/ A. Risk response deve%opment . Risk assessment C. Risk identification !. Risk tracking $. Risk response contro%

. 'he initia% step in the risk management process is to A. !etermine the %eve% of acceptab%e risk . Assess the risk potentia% C. dentif( the risks !. )et aside budget funds for managing the risks $. Appoint a risk manager

7. 2ne common mistake made ear%( in the risk identification process is to A. 3ot a%% possibi%ities p ossibi%ities are considered . 4articipants are over-optimistic C. 4articipants are over-pessimistic !. 5ocus on objectives and not on the events that cou%d produce conse6uences. $. 'oo much attention is given to past events

. n the beginning the focus of risk management shou%d be on risks that A. mpact the *ho%e project . mpact the critica% path C. Are kno*n !. "ave the greatest cost impact $. "ave the greatest schedu%e impact

8. 'he 1888 3A)A Mars C%imate 2rbiter is an e9amp%e of A. !isaster avoidance through proactive risk management . Murph(:s ;a* C. 4roper use of critica% thinking !. Mismanaged risk contro% $.

10. hich of the fo%%o*ing *ou%d not be considered a threat / A. nf%ation . Meeting the project schedu%e C. nternationa% disruptions !. $conomic conditions $. Competition

11. A %ist of 6uestions that address traditiona% areas of uncertaint( on a project is termed a risk A. Risk profi%e . =uestionnaire C. Research !. =uer( $. Check%ist

1&. hich of the fo%%o*ing is t(pica%%( inc%uded in risk profi%es/ A. Management aspects . Market aspects C. 'echnica% aspects !. oth A and C are inc%uded $. A, , and C are a%% inc%uded

1+. A%% of the fo%%o*ing are inc%uded in the risk identification process e9cept A. Customers . )ubcontractors C. Competitors !. >endors $. 3one of these are inc%uded


1. 2ne of the ke(s to success in risk identification is A. Critica% thinking . 2ptimism C. 4essimism !. A ?can do? attitude $. A%% of these are correct

1. 'he easiest and most common%( used u sed techni6ue for ana%(#ing risks is @@@@@ ana%(sis. A. 4robabi%it( . )cenario C. 4a(back !. Riskre*ard $. mpact

1. A risk profi%e is a %ist of 6uestions that address traditiona% areas of uncertaint( on a project that ans*ers deve%oped fromB A. hen the event might occur in the project . Chances of the event occurring C. nteraction *ith other parts of the project or *ith other projects !. 5rom previous, simi%ar projects $. Magnitude or severit( of the event:s impact

17. 'he risk management too% that is divided into three co%or-coded #ones representing major, moderate, and minor risks is the risk A. Assessment form . Responsibi%it( matri9 C. )cenario assessment !. mpact assessment $. Risk severit( matri9


1. 'he risk assessment form contains a%% of the fo%%o*ing e9c ept A. ;ike%ihood of the risk event occurring . 4otentia% impact of the risk event C. ho *i%% detect the occurrence of the risk event. !. !ifficu%t( of detecting the occurrence of the risk event $. hen the risk event ma( occur

18. 'he t*o sca%es of a risk severit( matri9 measure A. 'ime, cost . Cost, schedu%e C. mpact, cost !. 'ime, impact $. ;ike%ihood, impact

&0. hich of the fo%%o*ing is not one o ne of the probabi%it( ana%(sis too%s/ A. Ratiorange ana%(sis . !ecision tree C. 4$R' simu%ation !. 4$R' $. A%% of these are probabi%it( ana%(sis too%s

&1. 'his risk assessment too% is a variation of the risk severit( matri9 that inc%udes the ease of detection for each of the identified risks. A. 4$R' simu%ation . 5M$A ana%(sis C. Ratiorange ana%(sis !. 4robabi%it( ana%(sis $. )emi-6uantitative ana%(sis


&&. hich of the fo%%o*ing is not inc%uded in a 5ai%ure Mode and $ffects Ana%(sis/ A. mpact . 4robabi%it( C. !etection !. Risk va%ue $. A%% of these are inc%uded

&+. hich of the fo%%o*ing is used to revie* activit( and project risk/ A. 34> . )-curves C. 4$R' !. !ecision trees $. A%% of these can be used

&. hich of the fo%%o*ing is not one of the potentia% responses to a specific risk event/ A. Mitigating . Retaining C. gnoring !. 'ransferring $. )haring

&. A Risk Response Matri9 contains a%% of the fo%%o*ing e9cept A. Contingenc( p%an . 'rigger C. ho is responsib%e/ !. Response $. A%% of these are inc%uded in the matri9


&. 'he demo%ition of the )eatt%e ingdome D)napshot from 4racticeE is an e9amp%e of *hich of the fo%%o*ing/ A. Mitigating . Retaining C. gnoring !. 'ransferring $. )haring

&7. 'he risk associated *ith one of the ke( members being stuck b( %ightning *ou%d most %ike%( be hand%ed b( *hich of the fo%%o*ing/ A. Mitigating . Retaining C. gnoring !. 'ransferring $. )haring

&. 5unds that are for identified risks that have a %o* probabi%it( of occurring and that decrease as the project progresses are ca%%ed @@@@ @@ reserves. A. Management . udget C. Contingenc( !. 4added $. Fust in case

&8. 'echnica% risks areB A. Can often be the kind that cause the project to be shut do*n. . 4rob%ematic C. mposed duration dates !. oth A and  are correct $. A, , and C are a%% correct


+0. !etai%ing a%% identified risks, inc%uding descriptions, categor(, and probab i%it( of occurring, impact, responses, contingenc( p%ans, o*ners and current status is ca%%edB A. Management reserves . Change contro% C. Contingenc( reserves !. Risk register $. Risk profi%es

+1. hich of the fo%%o*ing is identified to cover major unforeseen risks and, hence, are app%ied to the tota% project/ A. udget reserves . Management reserves C. 'ime buffers !. oth  and C are correct $. A, , and C are a%% correct

+&. Change management s(stems are designed to accomp%ish a%% of the fo%%o*ing e9ceptB A. 'rack a%% changes that are to be imp%emented . Revie*, eva%uates, and approvedisapprove proposed changes forma%%( C. dentif( e9pected effects of proposed changes on schedu%e and budget !. Ref%ect scope changes in base%ine and performance measures $. A%% of the above are correct

Fill in the Blank Questions

++. 'he @@@@@@@@ impact of a risk event in a project is %ess if the event occurs ear%ier rather than %ater. @@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@

+. 'he %ike%ihood of a risk event occurring @@@@@@@@ as a project goes through its %ife c(c%e. @@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@


+. 'he first step in the Risk Management process is @@@@@@@@. @@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@

+. Risk events such as inf%ation, market acceptance, and government regu%ations are referred to as @@@@@@@@. @@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@

+7. A @@@@@@@@ is a %ist of 6uestions that address traditiona% areas of uncertaint( on a project. @@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@

+. 'he easiest and most common%( used techni6ue for ana%(#ing risks is @@@@@@@@. @@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@

+8. 'he @@@@@@@@ form identifies each risk event, the %ike%ihood of it occu rring, the potentia% impact, *hen it ma( occur, and the degree of difficu%t( in detecting it. @@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@

0. 'he @@@@@@@@ matri9 is divided into red, (e%%o*, and green #ones representing major, moderate, and minor risks. @@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@

1. 'he vertica% sca%e on the Risk )everit( Matri9 measures the @@@@@@@@@ of a potentia% risk event. @@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@

&. 'he hori#onta% sca%e on the Risk )everit( Matri9 measures the @@@@@@@@@ of a potentia% risk event. @@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@


+. n @@@@@@@@@@ the Risk )everit( Matri9 is e9tended b( inc%uding the ease of detecting a risk event occurring. @@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@

. n a @@@@@@@@, three different estimates of activit( times are used to statistica%%( predict the time an activit( *i%% take to comp%ete. @@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@

. 'he ?)napshot from 4ractice? case *here $%%ipsus )(stems deve%oped para%%e% protot(pe s(stems DA4 and FA>AE is an e9amp%e of @@@@@@@@@ a risk. @@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@

. 'esting a ne* project on a sma%%er iso%ated area prior to insta%%ing it for the entire organi#ation is an e9amp%e of @@@@@@@@ a risk. @@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@

7. 4erformance bonds, *arranties, and insurance are e9amp%es of @@@@@@@@ a risk. @@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@

. hen the entertainment industr( formed a consortium to define a common operating format for !>! it *as @@@@@@@@ the risk. @@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@

8. f a risk event is ver( un%ike%( to occur the project o*ner *ou%d probab%( @@@@@@@@ the risk. @@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@


0. A @@@@@@@@ identifies *hat to do if a potentia% risk event actua%%( occurs. @@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@

1. @@@@@@@@ reserves are identified for specific *ork packages and cover risks that have a %o* probabi%it( of occurring. @@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@

&. @@@@@@@@ reserves are contro%%ed b( the project manager and used to cover major unforeseen risks to the entire project. @@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@

+. A @@@@@@@@@@@@ is an a%ternative that *i%% be used if a possib%e foreseen risk event becomes a rea%it(. @@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@

. A @@@@@@@@@@@@ is usefu% for summari#ing ho* the project team p%ans to manage risks that have been identified. @@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@

True / False Questions

. 'he probabi%it( that a risk event *i%% occur is higher during the initia% stages of a project. 'rue 5a%se

. !ue to the impact over a %ong period of time, risk events that occur in the ear%( stages of a project *i%% have a greater cost impact than those that occur in %ater stages. 'rue 5a%se


7. !uring risk identification the sma%%er risks shou%d be identified first because the( *i%% natura%%( %ead to identif(ing the %arger risks. 'rue 5a%se

. 2ne common mistake that is made ear%( on in the risk identification process is to focus on conse6uences and not on the events that cou%d produce conse6uences. 'rue 5a%se

8. Risks such as inf%ation and monetar( e9change rates are not usua%%( inc%uded in a project:s risk assessment. 'rue 5a%se

0. 'he first step in the risk management process is Risk Assessment. Refer to 5igure 7.& 'rue 5a%se

1. A risk profi%e is a %ist of 6uestions that have been deve%oped and refined from previous, simi%ar projects. 'rue 5a%se

&. 'he risk identification process shou%d be %imited to just the core project team. 'rue 5a%se

+. )ince the goa% is to find prob%ems before the( happen, the project manager shou%d encourage critica% thinking *hen it comes to risk identification. 'rue 5a%se


. 'he Risk )everit( Matri9 rates risk events based u pon schedu%e and cost. Refer to 5igure 7.7 'rue 5a%se

. n a Risk )everit( Matri9 a green #one risk is considered inconse6uentia% and ignored un%ess their status changes. 'rue 5a%se

. 'he 6ua%it( and credibi%it( of the risk ana%(sis process re6uires that different %eve%s of risk probabi%ities and impacts be defined. 'rue 5a%se

7. Adopting proven techno%og( instead of e9perimenta% techno%og( is an e9amp%e of mitigating a risk. 'rue 5a%se

. 'he 5M$A method ca%cu%ates a risk va%ue b( assigning ease of detection ratings to the ke( risk e%ements. 'rue 5a%se

8. 4erformance bonds, *arranties, and guarantees are financia% instruments used to share risk. 'rue 5a%se

70. 5i9ed price contracts are an e9amp%e of transferring risk from an o*ner to a co ntractor. 'rue 5a%se


71. )chedu%ing outdoor *ork in the summer, investing in up front safet( training, and choosing high 6ua%it( materia%s are e9amp%es of retaining a risk. 'rue 5a%se

7&. udget reserves are setup to cover identified risks associated *ith specific segments of a project *hi%e management reserves are set up to cover unidentified risks associated *ith the tota% project. 'rue 5a%se

7+. Change management s(stems invo%ve reporting, contro%%ing, and recording changes to the project base%ine. 'rue 5a%se

7. 4roject managers need to estab%ish an environment in *hich participants fee% comfortab%e raising concerns and admitting mistakes. 'rue 5a%se

7. Contingenc( funding is made up of budget reserves and management reserves. 'rue 5a%se

Short Answer Questions

7. !escribe the re%ationship bet*een the %ike%ihood of a risk event occurring and the cost of fi9ing the risk event as a project proceeds through its %ife c(c%e.


77. dentif( and brief%( describe the four steps in risk management.

7. !escribe the process for identif(ing project risks.

78. hat is a risk profile and *hat benefits does it provide to risk management/

0. dentif( at %east si9 items that ma( be inc%uded on a Risk 4rofi%e.


1. "o* shou%d a risk assessment be conducted/

&. hat is a Risk Severity Matrix and *hat does it do/

+. dentif( and brief%( describe the five *a (s to respond to identified risks.

. hat is the difference bet*een budget reserves and management reserves/


. hat is Change Contro% Management and *hat function does it perform/

. dentif( and brief%( describe the parts of a Risk Response Matri9 and e9p%ain ho* one *ou%d be used.

7. Compare and contrast budget reserves and management reserves.


Chapter 07 Managing Risk Ans*er e(

Multiple Choice Questions

1. An uncertain event or condition that, if it occurs, has a positive or negative effect on a project objectives is termed. A. Random chance . A disaster C. Risk !. "a#ard $. ad %uck n the conte9t of projects, risk is an uncertain event or condition that, if it occurs, has a positive or negative effect on project objectives.

AACSB: Reflective Thinking Blooms: Comprehension !earning "b#ective: Risk Management $rocess !evel: %asy

&. 'he chances of a risk event occurring as a project proceeds through its %ife c(c%e tends to A. )%o*%( rise . !rop sharp%( and then %eve% out C. Rise sharp%( and then %eve% out !. Remain about the same E. )%o*%( drop )ee 5igure 7.1 on 4age &1&.

AACSB: Reflective Thinking Blooms: &no'ledge !earning "b#ective: Risk Management $rocess !evel: Medium


+. 'he cost impact of a risk event occurring as a project proceeds through its %ife c(c%e tends to A. )%o*%( rise . !rop sharp%( and then %eve% out C. Rise sharp%( and then %eve% out !. Remain about the same $. )%o*%( drop 'he cost impact of a risk event in the project is %ess if the event occurs ear%ier rather than %ater.


. 'he attempt to recogni#e and manage potentia% and unforeseen troub%e spots that ma( occur *hen a project is imp%emented is kno*n as A. Risk forecasting B. Risk management C. Contingenc( p%anning !. )cenario ana%(sis $. !isaster protection Risk management attempts to recogni#e and manage potentia% and unforeseen troub%e spots that ma( occur *hen the project is imp%emented.

AACSB: Analytic Blooms: Comprehension !earning "b#ective: Risk Management $rocess !evel: %asy


. hich of the fo%%o*ing is not one of the steps in the risk management process/ A. Risk response deve%opment . Risk assessment C. Risk identification . Risk tracking $. Risk response contro% )ee 5igure 7.& on 4age &1+.


. 'he initia% step in the risk management process is to A. !etermine the %eve% of acceptab%e risk . Assess the risk potentia% C. dentif( the risks !. )et aside budget funds for managing the risks $. Appoint a risk manager )ee 5igure 7.& on 4age &1+.



7. 2ne common mistake made ear%( in the risk identification process is to A. 3ot a%% possibi%ities are considered . 4articipants are over-optimistic C. 4articipants are over-pessimistic . 5ocus on objectives and not on the events that cou%d produce conse6uences. $. 'oo much attention is given to past events 2ne common mistake that is made ear%( in the risk identification process is to focus on objectives and not on the events that cou%d produce conse6uences.

AACSB: Analytic Blooms: &no'ledge !earning "b#ective: Step (: Risk )dentification !evel: %asy

. n the beginning the focus of risk management shou%d be on risks that A. mpact the *ho%e project . mpact the critica% path C. Are kno*n !. "ave the greatest cost impact $. "ave the greatest schedu%e impact 'he focus at the beginning shou%d be on risks that can affect the *ho%e project as opposed to a specific section of the project or net*ork.

AACSB: Analytic Blooms: &no'ledge !earning "b#ective: Step (: Risk )dentification !evel: Medium


8. 'he 1888 3A)A Mars C%imate 2rbiter is an e9amp%e of A. !isaster avoidance through proactive risk management . Murph(:s ;a* C. 4roper use of critica% thinking . Mismanaged risk contro% $.

10. hich of the fo%%o*ing *ou%d not be considered a threat / A. nf%ation B. Meeting the project schedu%e C. nternationa% disruptions !. $conomic conditions $. Competition 'here are sources e9terna% to the organi#ation, such as inf%ation, market acceptance, e9change rates, and government regu%ations. n practice, these risk events are often referred to as ?threats? to differentiate them from those that are not *ithin the project manager:s or team:s responsibi%it( area.

AACSB: Analytic Blooms: Synthesis !earning "b#ective: Risk Management $rocess !evel: *ifficult


11. A %ist of 6uestions that address traditiona% areas of uncertaint( on a project is termed a risk A. Risk profi%e . =uestionnaire C. Research !. =uer( $. Check%ist A risk profi%e is a %ist of 6uestions that address traditiona% areas of uncertaint( on a project.

AACSB: Reflective Thinking Blooms: Comprehension !earning "b#ective: Step (: Risk )dentification !evel: %asy

1&. hich of the fo%%o*ing is t(pica%%( inc%uded in risk profi%es/ A. Management aspects . Market aspects C. 'echnica% aspects . oth A and C are inc%uded $. A, , and C are a%% inc%uded Risk profi%es recogni#e the uni6ue strengths and *eak nesses of the firmG a%so risk profi%es address both technica% and management risks.

AACSB: Reflective Thinking Blooms: Comprehension !earning "b#ective: Step (: Risk )dentification !evel: Medium


1+. A%% of the fo%%o*ing are inc%uded in the risk identification process e9cept A. Customers . )ubcontractors C. Competitors !. >endors $. 3one of these are inc%uded 'he risk identification process shou%d not be %imited to just the c ore team. nput from customers, sponsors, subcontractors, vendors, and other stakeho%ders shou%d be so%icited.

AACSB: Reflective Thinking Blooms: Comprehension !earning "b#ective: Step (: Risk )dentification !evel: %asy

1. 2ne of the ke(s to success in risk identification is A. Critica% thinking . 2ptimism C. 4essimism !. A ?can do? attitude $. A%% of these are correct hi%e a ?can do? attitude is essentia% during imp%ementation, project managers have to encourage critica% thinking *hen it comes to risk identification.

AACSB: Analytic Blooms: Comprehension !earning "b#ective: Step (: Risk )dentification !evel: Medium


1. 'he easiest and most common%( used techni6ue for ana%(#ing risks is @@@@@ ana%(sis. A. 4robabi%it( B. )cenario C. 4a(back !. Riskre*ard $. mpact )cenario ana%(sis is the easiest and most common%( used techni6ue for ana%(#ing risks.

AACSB: Analytic Blooms: &no'ledge !earning "b#ective: Step +: Risk Assessment !evel: %asy

1. A risk profi%e is a %ist of 6uestions that address traditiona% areas of uncertaint( on a project that ans*ers deve%oped fromB A. hen the event might occur in the project . Chances of the event occurring C. nteraction *ith other parts of the project or *ith other projects . 5rom previous, simi%ar projects $. Magnitude or severit( of the event:s impact

AACSB: Reflective Thinking Blooms: Comprehension !earning "b#ective: Step +: Risk Assessment !evel: Medium


17. 'he risk management too% that is divided into three co%or-coded #ones representing major, moderate, and minor risks is the risk A. Assessment form . Responsibi%it( matri9 C. )cenario assessment !. mpact assessment E. Risk severit( matri9 'he risk severit( matri9 provides a basis for prioriti#ing *hich risks to address. Red #one risks receive first priorit( fo%%o*ed b( (e%%o* #one risks. Hreen #one risks are t(pica%%( considered inconse6uentia% and ignored un%ess their status changes.

AACSB: Analytic Blooms: &no'ledge !earning "b#ective: Step +: Risk Assessment !evel: Medium

1. 'he risk assessment form contains a%% of the fo%%o*ing e9c ept A. ;ike%ihood of the risk event occurring . 4otentia% impact of the risk event C. ho *i%% detect the occurrence of the risk event. !. !ifficu%t( of detecting the occurrence of the risk event $. hen the risk event ma( occur )ee 5igure 7. on 4age &17.

AACSB: Reflective Thinking Blooms: &no'ledge !earning "b#ective: Step +: Risk Assessment !evel: Medium


18. 'he t*o sca%es of a risk severit( matri9 measure A. 'ime, cost . Cost, schedu%e C. mpact, cost !. 'ime, impact E. ;ike%ihood, impact 'he risk matri9 presented in 5igure 7.7 on page &1 consists of a  9  arra( of e%ements *ith each e%ement representing a different set of impact and %ike%ihood va%ues.

AACSB: Analytic Blooms: Comprehension !earning "b#ective: Step +: Risk Assessment !evel: Medium

&0. hich of the fo%%o*ing is not one of the probabi%it( ana%(sis too%s/ A. Ratiorange ana%(sis . !ecision tree C. 4$R' simu%ation !. 4$R' $. A%% of these are probabi%it( ana%(sis too%s !ecision trees have been used to assess a%ternative courses of action using e9pected va%ues 4$R' Dprogram eva%uation and revie* techni6ueE and 4$R' simu%ation can be used to revie* activit( and project risk.



&1. 'his risk assessment too% is a variation of the risk severit( matri9 that inc%udes the ease of detection for each of the identified risks. A. 4$R' simu%ation B. 5M$A ana%(sis C. Ratiorange ana%(sis !. 4robabi%it( ana%(sis $. )emi-6uantitative ana%(sis 5ai%ure Mode and $ffects Ana%(sis D5M$AE e9tends the risk severit( matri9 b( inc%uding ease of detection in the e6uationB mpact 9 4robabi%it( 9 !etection I Risk >a%ue.


&&. hich of the fo%%o*ing is not inc%uded in a 5ai%ure Mode and $ffects Ana%(sis/ A. mpact . 4robabi%it( C. !etection !. Risk va%ue E. A%% of these are inc%uded 5ai%ure Mode and $ffects Ana%(sis D5M$AE e9tends the risk severit( matri9 b( inc%uding ease of detection in the e6uationB mpact 9 4robabi%it( 9 !etection I Risk >a%ue.



&+. hich of the fo%%o*ing is used to revie* activit( and project risk/ A. 34> . )-curves C. 4$R' !. !ecision trees $. A%% of these can be used 4$R' Dprogram eva%uation and revie* techni6ueE and 4$R' simu%ation can be used to revie* activit( and project risk.


&. hich of the fo%%o*ing is not one of the potentia% responses to a specific risk event/ A. Mitigating . Retaining C. gnoring !. 'ransferring $. )haring hen a risk event is identified and assessed, a decision must be made concerning *hich response is appropriate for the specific event. Responses to risk can be c%assified as mitigating, avoiding, transferring, sharing, or retaining.

AACSB: Reflective Thinking Blooms: &no'ledge !earning "b#ective: Step ,: Risk Response *evelopment !evel: Medium


&. A Risk Response Matri9 contains a%% of the fo%%o*ing e9cept A. Contingenc( p%an . 'rigger C. ho is responsib%e/ !. Response E. A%% of these are inc%uded in the matri9 )ee 5igure 7. on 4age &&.

AACSB: Analytic Blooms: &no'ledge !earning "b#ective: Contingency $lanning !evel: Medium

&. 'he demo%ition of the )eatt%e ingdome D)napshot from 4racticeE is an e9amp%e of *hich of the fo%%o*ing/ A. Mitigating . Retaining C. gnoring !. 'ransferring $. )haring Reducing risk is usua%%( the first a%ternative considered. 'here are basica%%( t*o strategies for mitigating riskB D1E reduce the %ike%ihood that the event *i%% occur and or D&E reduce the impact that the adverse event *ou%d have on the project. Most risk teams focus first on reducing the %ike%ihood of risk events since, if successfu%, this ma( e%iminate the need to consider the potentia%%( cost%( second strateg(. 'he !ome to !ust )napshot from 4ractice detai%s the steps Contro%%ed !emo%ition took to minimi#e damage *hen the( imp%oded the )eatt%e ingdome.

AACSB: Reflective Thinking Blooms: Comprehension !earning "b#ective: Step ,: Risk Response *evelopment !evel: Medium


&7. 'he risk associated *ith one of the ke( members being stuck b( %ightning *ou%d most %ike%( be hand%ed b( *hich of the fo%%o*ing/ A. Mitigating B. Retaining C. gnoring !. 'ransferring $. )haring 'he risk of a project manager being struck b( %ightning at a *ork site *ou%d have major negative impact on the project, but the %ike%ihood is so %o* it is not *orth( of consideration. Converse%(, peop%e do change jobs, so an event %ike the %oss of ke( project personne% *ou%d have not on%( an adverse impact but a%so a high %ike%ihood of occurring in some organi#ations. f so, then it *ou%d be *ise for that organi#ation to be proactive and mitigate this risk b( deve%oping incentive schemes for retaining specia%ists andor engaging in cross-training to reduce the impact of turnover.


&. 5unds that are for identified risks that have a %o* probabi%it( of occurring and that decrease as the project progresses are ca%%ed @@@@ @@ reserves. A. Management B. udget C. Contingenc( !. 4added $. Fust in case udget reserves are set up to cover identified risksG these reserves are those a%%ocated to specific segments or de%iverab%es of the project.

AACSB: Reflective Thinking Blooms: &no'ledge !earning "b#ective: Contingency -unding and Time Buffers !evel: Medium


&8. 'echnica% risks areB A. Can often be the kind that cause the project to be shut do*n. . 4rob%ematic C. mposed duration dates . oth A and  are correct $. A, , and C are a%% correct 'echnica% risks are prob%ematicG the( can often be the kind that cause the project to be shut do*n.

AACSB: Reflective Thinking Blooms: Comprehension !earning "b#ective: Contingency $lanning !evel: Medium

+0. !etai%ing a%% identified risks, inc%uding descriptions, categor(, and probab i%it( of occurring, impact, responses, contingenc( p%ans, o*ners and current status is ca%%edB A. Management reserves . Change contro% C. Contingenc( reserves . Risk register $. Risk profi%es A risk register detai%s a%% identified risks, inc%uding descriptions, categor(, and probabi%it( of occurring, impact, responses, contingenc( p%ans, o*ners and current status.

AACSB: Analytic Blooms: &no'ledge !earning "b#ective: Step .: Risk Response Control !evel: Medium


+1. hich of the fo%%o*ing is identified to cover major unforeseen risks and, hence, are app%ied to the tota% project/ A. udget reserves B. Management reserves C. 'ime buffers !. oth  and C are correct $. A, , and C are a%% correct Management reserve funds are needed to cover major unforeseen risks and, hence, are app%ied to the tota% project.

AACSB: Reflective Thinking Blooms: &no'ledge !earning "b#ective: Contingency -unding and Time Buffers !evel: Medium

+&. Change management s(stems are designed to accomp%ish a%% of the fo%%o*ing e9ceptB A. 'rack a%% changes that are to be imp%emented . Revie*, eva%uates, and approvedisapprove proposed changes forma%%( C. dentif( e9pected effects of proposed changes on schedu%e and budget !. Ref%ect scope changes in base%ine and performance measures E. A%% of the above are correct )ee %ist on page &+1.

AACSB: Reflective Thinking Blooms: Comprehension !earning "b#ective: Change Control Management !evel: Medium

Fill in the Blank Questions


++. 'he @@@@@@@@ impact of a risk event in a project is %ess if the event occurs ear%ier rather than %ater. cost )ee 5igure 7.1 on 4age &1&.

AACSB: Analytic Blooms: &no'ledge !earning "b#ective: Risk Management $rocess !evel: %asy

+. 'he %ike%ihood of a risk event occurring @@@@@@@@ as a project goes through its %ife c(c%e. !ecreases )ee 5igure 7.1 on 4age &1&.


+. 'he first step in the Risk Management process is @@@@@@@@. risk i!enti"ication )ee 5igure 7.& on 4age &1+.



+. Risk events such as inf%ation, market acceptance, and government regu%ations are referred to as @@@@@@@@. threats 'he sources of project risks are un%imited. 'here are sources e9terna% to the organi#ation, such as inf%ation, market acceptance, e9change rates, and government regu%ations. n practice, these risk events are often referred to as ?threats? to differentiate them from those that are not *ithin the project manager:s or team:s responsibi%it( area.

AACSB: Analytic Blooms: Comprehension !earning "b#ective: Risk Management $rocess !evel: Medium

+7. A @@@@@@@@ is a %ist of 6uestions that address traditiona% areas of uncertaint( on a project. risk pro"ile A risk profi%e is a %ist of 6uestions that address traditiona% areas of uncertaint( on a project.


+. 'he easiest and most common%( used techni6ue for ana%(#ing risks is @@@@@@@@. scenario anal#sis )cenario ana%(sis is the easiest and most common%( used techni6ue for ana%(#ing risks.

AACSB: Reflective Thinking Blooms: &no'ledge !earning "b#ective: Step +: Risk Assessment !evel: %asy


+8. 'he @@@@@@@@ form identifies each risk event, the %ike%ihood of it occu rring, the potentia% impact, *hen it ma( occur, and the degree of difficu%t( in detecting it. risk assess$ent )ee 5igure 7. on 4age &17.


0. 'he @@@@@@@@ matri9 is divided into red, (e%%o*, and green #ones representing major, moderate, and minor risks. risk se%erit# 'he risk severit( matri9 provides a basis for prioriti#ing *hich risks to address. Red #one risks receive first priorit( fo%%o*ed b( (e%%o* #one risks. Hreen #one risks are t(pica%%( considered inconse6uentia% and ignored un%ess their status changes.


1. 'he vertica% sca%e on the Risk )everit( Matri9 measures the @@@@@@@@@ of a potentia% risk event. likelihoo! )ee 5igure 7. on 4age &1.

AACSB: Analytic Blooms: Comprehension !earning "b#ective: Step +: Risk Assessment !evel: *ifficult


&. 'he hori#onta% sca%e on the Risk )everit( Matri9 measures the @@@@@@@@@ of a potentia% risk event. i$pact )ee 5igure 7. on 4age &1.

AACSB: Analytic Blooms: Synthesis !earning "b#ective: Step +: Risk Assessment !evel: *ifficult

+. n @@@@@@@@@@ the Risk )everit( Matri9 is e9tended b( inc%uding the ease of detecting a risk event occurring. Failure Mote an! E""ects Anal#sis &FMEA' 5ai%ure Mode and $ffects Ana%(sis D5M$AE e9tends the risk severit( matri9 b( inc%uding ease of detection in the e6uationB mpact 9 4robabi%it( 9 !etection I Risk >a%ue.


. n a @@@@@@@@, three different estimates of activit( times are used to statistica%%( predict the time an activit( *i%% take to comp%ete. pro(a(ilit# anal#sis 'here are man( statistica% techni6ues avai%ab%e to the project manager that can assist in assessing project risk. !ecision trees have been used to assess a%ternative courses of action using e9pected va%ues. )tatistica% variations of net present va%ue D34>E have been used to assess cash f%o* risks in projects. Corre%ations bet*een past projects: cash f%o* and )-curves Dcumu%ative project cost curveJbase%ineJover the %ife of the projectE have been used to assess cash f%o* risks.

AACSB: Analytic Blooms: &no'ledge !earning "b#ective: Step ,: Risk Response *evelopment !evel: Medium


. 'he ?)napshot from 4ractice? case *here $%%ipsus )(stems deve%oped para%%e% protot(pe s(stems DA4 and FA>AE is an e9amp%e of @@@@@@@@@ a risk. a%oi!ing Risk avoidance is changing the project p%an to e%iminate the risk or condition. A%though it is impossib%e to e%iminate a%% risk events, some specific risks ma( be avoided be fore (ou %aunch the project. Rikard je%%berg:s so%ution *as to have projects in his compan(:s portfo%io based on both standards. $%%ipsus bui%t ear%( protot(pes of both s(stems and took them to a trade sho*, *ith both s(stems sitting side b( side. ?e kne* *ithin an hour *hich *a( to go,? sa(s !oug%as !avies, the C22. $%%ipsus began securing mi%%ion do%%ar contracts to supp%( its Fava-based s(stem to %eading <.). operators.

AACSB: Reflective Thinking Blooms: &no'ledge !earning "b#ective: Step ,: Risk Response *evelopment !evel: Medium

. 'esting a ne* project on a sma%%er iso%ated area prior to insta%%ing it for the entire organi#ation is an e9amp%e of @@@@@@@@ a risk. $itigating Reducing risk is usua%%( the first a%ternative considered. 'here are basica%%( t*o strategies for mitigating riskB D1E reduce the %ike%ihood that the event *i%% occur and or D&E reduce the impact that the adverse event *ou%d have on the project. Most risk teams focus first on reducing the %ike%ihood of risk events since, if successfu%, this ma( e%iminate the need to consider the potentia%%( cost%( second strateg(.

AACSB: Analytic Blooms: Comprehension !earning "b#ective: Step ,: Risk Response *evelopment !evel: Medium


7. 4erformance bonds, *arranties, and insurance are e9amp%es of @@@@@@@@ a risk. trans"erring 4assing risk to another part( is commonG this transfer does not chan ge risk. 4assing risk to another part( a%most a%*a(s resu%ts in pa(ing a premium for this e9 emption. 5i9ed-price contracts are the c%assic e9amp%e of transferring risk from an o*ner to a contractor.


. hen the entertainment industr( formed a consortium to define a common operating format for !>! it *as @@@@@@@@ the risk. sharing 'his strateg( invo%ves a%%ocating some or a%% of the o*nership of an opportunit( to another part( *ho is best ab%e to capture the opportunit( for the benefit of the project. $9amp%es inc%ude estab%ishing continuous improvement incentives for e9terna% contractors or joint ventures.

AACSB: Reflective Thinking Blooms: Comprehension !earning "b#ective: Contingency $lanning !evel: Medium

8. f a risk event is ver( un%ike%( to occur the project o*ner *ou%d probab%( @@@@@@@@ the risk. retain )ome risks are so %arge it is not feasib%e to con sider transferring or reducing the event De.g., an earth6uake or f%oodE. 'he project o*ner assumes the risk because the chance of such an event occurring is s%im.



0. A @@@@@@@@ identifies *hat to do if a potentia% risk event actua%%( occurs. risk response $atri) )ee 5igure 7. on 4age &&.

AACSB: Analytic Blooms: Comprehension !earning "b#ective: Contingency $lanning !evel: Medium

1. @@@@@@@@ reserves are identified for specific *ork packages and cover risks that have a %o* probabi%it( of occurring. Bu!get 'hese reserves are identified for specific *ork packages or segments of a project found in the base%ine budget or *ork breakdo*n structure. 5or e9amp%e, a reserve amount might be added to ?computer coding? to cover the risk of ?testing? sho*ing a coding prob%em. 'he reserve amount is determined b( costing out the accepted contingenc( or recover( p%an. 'he budget reserve shou%d be communicated to the project team.

AACSB: Analytic Blooms: Comprehension !earning "b#ective: Contingency -unding and Time Buffers !evel: Medium

&. @@@@@@@@ reserves are contro%%ed b( the project manager and used to cover major unforeseen risks to the entire project. Manage$ent 'hese reserve funds are needed to cover major unforeseen risks and, hence, are app%ied to the tota% project. 5or e9amp%e, a major scope change ma( appear necessar( mid*a( in the project.

AACSB: Reflective Thinking Blooms: Comprehension !earning "b#ective: Contingency -unding and Time Buffers !evel: Medium


+. A @@@@@@@@@@@@ is an a%ternative that *i%% be used if a possib%e foreseen risk event becomes a rea%it(. contingenc# plan A contingenc( p%an is an a%ternative p%an that *i%% be used if a possib%e foreseen risk event becomes a rea%it(.

AACSB: Analytic Blooms: &no'ledge !earning "b#ective: Contingency $lanning !evel: %asy

. A @@@@@@@@@@@@ is usefu% for summari#ing ho* the project team p%ans to manage risks that have been identified. Risk Response Matri) Risk response matrices such as the one sho*n in 5igure 7. on page && are usefu% for summari#ing ho* the project team p%ans to manage risks that have been identified.

AACSB: Analytic Blooms: Comprehension !earning "b#ective: Contingency $lanning !evel: %asy

True / False Questions

. 'he probabi%it( that a risk event *i%% occur is higher during the initia% stages of a project. TR*E 'he chances of a risk event occurring De.g., an error in time estimates, cost estimates, or design techno%og(E are greatest in the concept, p%anning, and start-up phases of the project.



. !ue to the impact over a %ong period of time, risk events that occur in the ear%( stages of a project *i%% have a greater cost impact than those that occur in %ater stages. FA+SE 'he cost impact of a risk event in the project is %ess if the event occurs ear%ier rather than %ater.

AACSB: Reflective Thinking Blooms: &no'ledge !earning "b#ective: Risk Management $rocess !evel: %asy

7. !uring risk identification the sma%%er risks shou%d be identified first because the( *i%% natura%%( %ead to identif(ing the %arger risks. FA+SE 'he focus at the beginning shou%d be on risks that can affect the *ho%e project as opposed to a specific section of the project or net*ork.


. 2ne common mistake that is made ear%( on in the risk identification process is to focus on conse6uences and not on the events that cou%d produce conse6uences. TR*E 2ne common mistake that is made ear%( in the risk identification process is to focus on objectives and not on the events that cou%d produce conse6uences.



8. Risks such as inf%ation and monetar( e9change rates are not usua%%( inc%uded in a project:s risk assessment. TR*E 'he sources of project risks are un%imited. 'here are sources e9terna% to the organi#ation, such as inf%ation, market acceptance, e9change rates, and government regu%ations. n practice, these risk events are often referred to as ?threats? to differentiate them from those that are not *ithin the project manager:s or team:s responsibi%it( area.

AACSB: Reflective Thinking Blooms: Comprehension !earning "b#ective: Step (: Risk )dentification !evel: *ifficult

0. 'he first step in the risk management process is Risk Assessment. Refer to 5igure 7.& FA+SE )ee 5igure 7.& on 4age &1+. 'he first step is Risk dentification. Risk Assessment is the second step.

AACSB: Analytic Blooms: &no'ledge !earning "b#ective: Step (: Risk )dentification !evel: %asy

1. A risk profi%e is a %ist of 6uestions that have been deve%oped and refined from previous, simi%ar projects. TR*E A risk profi%e is a %ist of 6uestions that address traditiona% areas of uncertaint( on a project. 'hese 6uestions have been deve%oped and refined from previous, simi%ar projects.



&. 'he risk identification process shou%d be %imited to just the core project team. FA+SE 'he risk identification process shou%d not be %imited to just the c ore team. nput from customers, sponsors, subcontractors, vendors, and other stakeho%ders shou%d be so%icited.


+. )ince the goa% is to find prob%ems before the( happen, the project manager shou%d encourage critica% thinking *hen it comes to risk identification. TR*E 2ne of the ke(s to success in risk identification is attitude. hi%e a ?can do? attitude is essentia% during imp%ementation, project managers have to encourage critica% thinking *hen it comes to risk identification. 'he goa% is to find potentia% prob%ems before the( happen.


. 'he Risk )everit( Matri9 rates risk events based u pon schedu%e and cost. Refer to 5igure 7.7 FA+SE )ee 5igure 7.7 on 4age &1. 'he Risk )everit( Matri9 events are based on %ike%ihood and impact.



. n a Risk )everit( Matri9 a green #one risk is considered inconse6uentia% and ignored un%ess their status changes. TR*E 'he risk severit( matri9 Hreen #one risks are t(pica%%( considered inconse6uentia% and ignored un%ess their status changes.


. 'he 6ua%it( and credibi%it( of the risk ana%(sis process re6uires that different %eve%s of risk probabi%ities and impacts be defined. TR*E 'he 6ua%it( and credibi%it( of the risk ana%(sis process re6uires that d ifferent %eve%s of risk probabi%ities and impacts be defined.

AACSB: Analytic Blooms: &no'ledge !earning "b#ective: Step +: Risk Assessment !evel: %asy

7. Adopting proven techno%og( instead of e9perimenta% techno%og( is an e9amp%e of mitigating a risk. FA+SE Adopting proven techno%og( instead of e9perimenta% techno%og( is an e9amp%e of avoiding risk.



. 'he 5M$A method ca%cu%ates a risk va%ue b( assigning ease of detection ratings to the ke( risk e%ements. TR*E 5ai%ure Mode and $ffects Ana%(sis D5M$AE e9tends the risk severit( matri9 b( inc%uding ease of detection in the e6uationB mpact 9 4robabi%it( 9 !etection I Risk >a%ue.


8. 4erformance bonds, *arranties, and guarantees are financia% instruments used to share risk. FA+SE 4erformance bonds, *arranties, and guarantees are other financia% instruments used to transfer risk.

AACSB: Analytic Blooms: Comprehension !earning "b#ective: Step ,: Risk Response *evelopment !evel: Medium

70. 5i9ed price contracts are an e9amp%e of transferring risk from an o*ner to a co ntractor. TR*E 5i9ed-price contracts are the c%assic e9amp%e of transferring risk from an o*ner to a contractor.

AACSB: Reflective Thinking Blooms: &no'ledge !earning "b#ective: Step ,: Risk Response *evelopment !evel: %asy


71. )chedu%ing outdoor *ork in the summer, investing in up front safet( training, and choosing high 6ua%it( materia%s are e9amp%es of retaining a risk. FA+SE An e9amp%e of reducing the probabi%it( of risks occurring are schedu%ing outdoor *ork during the summer months, investing in up-front safet( training, and choosing high-6ua%it( materia%s and e6uipment.


7&. udget reserves are setup to cover identified risks associated *ith specific segments of a project *hi%e management reserves are set up to cover unidentified risks associated *ith the tota% project. TR*E udget reserves are set up to cover identified risksG these reserves are those a%%ocated to specific segments or de%iverab%es of the project. Management reserves are set up to cover unidentified risks and are a%%ocated to risks associated *ith the tota% p roject.

AACSB: Reflective Thinking Blooms: Comprehension !earning "b#ective: Contingency -unding and Time Buffers !evel: %asy

7+. Change management s(stems invo%ve reporting, contro%%ing, and recording changes to the project base%ine. TR*E Change management s(stems invo%ve reporting, contro%%ing, and recording changes to the project base%ine. D3oteB )ome organi#ations consider change contro% s(stems part of configuration management.E

AACSB: Analytic Blooms: &no'ledge !earning "b#ective: Change Control Management !evel: %asy


7. 4roject managers need to estab%ish an environment in *hich participants fee% comfortab%e raising concerns and admitting mistakes. FA+SE 4roject managers need to estab%ish an environment in *hich participants fee% comfortab%e raising concerns and admitting mistakes.

AACSB: Analytic Blooms: Comprehension !earning "b#ective: Constructing a $ro#ect /et'ork !evel: %asy

7. Contingenc( funding is made up of budget reserves and management reserves. TR*E n practice, the contingenc( reserve fund is t(pica%%( divided into budget and management reserve funds for contro% purposes.

AACSB: Analytic Blooms: &no'ledge !earning "b#ective: Contingency -unding and Time Buffers !evel: %asy

Short Answer Questions

7. !escribe the re%ationship bet*een the %ike%ihood of a risk event occurring and the cost of fi9ing the risk event as a project proceeds through its %ife c(c%e. n the ear%( stages of the project %ife c(c%e the probabi%it( of a risk event occurring is greater than at an( other time and the cost to fi9 it is %o*er than at an( other point. As time passes the probabi%it( of occurrence drops %o*er and %o*er *hi%e the cost rises. )ee figure 7-1.



77. dentif( and brief%( describe the four steps in risk management. 1. Risk dentificationG a%% possib%e risks are identified, &. Risk AssessmentG risks are assessed in terms of importance and need for attention, +. Risk Response !eve%opmentG p%ans are deve%oped to respond if the risk actua%%( occurs, and . Risk Response Co ntro%G the actua% response to the risk and contro%%ing changes associated *ith the risks.


7. !escribe the process for identif(ing project risks. 'he project manager pu%%s together a risk management team consisting of core team members and other re%evant stakeho%ders and uses brainstorming and other techni6ues to identif( project risks. 5ocus shou%d be on the ) and the risks associated *ith the de%iverab%es.


78. hat is a risk profile and *hat benefits does it provide to risk management/ A risk profi%e is a %ist of 6uestions that address traditiona% areas of uncertaint( on a project. 'he 6uestions have been deve%oped and refined from previous, simi%ar projects. 'hese profi%es are generated and maintained b( the project office and are updated and refined during the %ife of the project. 'his historica% fi%e assists in identif(ing risks for future projects.

AACSB: Analytic Blooms: Synthesis !earning "b#ective: Step (: Risk )dentification !evel: *ifficult


0. dentif( at %east si9 items that ma( be inc%uded on a Risk 4rofi%e. 1. technica% re6uirements, &. !esign, +. 'esting, . !eve%opment, . )chedu%e, . udget, 7. =ua%it(, . Management, 8. ork $nvironment, 10. )taffing, 11. Customer, and 1&. Contractors.


1. "o* shou%d a risk assessment be conducted/ 3ot a%% identified risks deserve attention, some are trivia% and others are serious threats. 'he )cenario ana%(sis is the easiest and most common%( used techni6ue for ana%(#ing risks. $ach risk is assessed in terms of 1. *hat the risk are, &. the outcomes of the event:s occurrence, +. the severit( of the event:s impact, . the probabi%it( of the event occurring, . *hen the event ma( occur, and . the interaction *ith other parts of the project or other projects.

AACSB: Analytic Blooms: Synthesis !earning "b#ective: Step +: Risk Assessment !evel: *ifficult

&. hat is a Risk Severity Matrix and *hat does it do/ Risks are p%aced on a matri9 that has ;ike%ihood as the vertica% a9is and mpact as the hori#onta% a9is. Risks in the upper right corner are considered major, those further %eft are considered moderate, *hi%e the rest are considered minor. 'he matri9 is usua%%( co%or-coded *ith the major risks in red, moderate risks in (e%%o* and minor risks in green. t is an easi%( read graphica% representation of a project:s risks.



+. dentif( and brief%( describe the five *a (s to respond to identified risks. 1. Mitigate the riskG dup%icate s(stems, backup s(stems, a%ternate techno%og( dev e%opment, &. Avoid the riskG changing the project p%an to e%iminate the risk, +. 'ransfer the riskG fi9ed-price contract, insurance, . )haring the riskG find o thers to share the costs of the risk, and . Retain the riskG take preventative measures to reduce the risk such as training.

AACSB: Analytic Blooms: Synthesis !earning "b#ective: Step ,: Risk Response *evelopment !evel: Medium

. hat is the difference bet*een budget reserves and management reserves/ udget reserves are contro%%ed b( team participants and have been identified for kno*n risks that have a %o* chance of occurring and are direct%( associated *ith specific *ork packages. Management reserves are contro%%ed b( the project manager and cover items *hich *ere unforeseen usua%%( at the tota% project %eve%.

AACSB: Analytic Blooms: Comprehension !earning "b#ective: Contingency -unding and Time Buffers !evel: Medium

. hat is Change Contro% Management and *hat function does it perform/ Change Contro% Management is the forma% process for making and tracking changes once a project has started. An( changes must be detai%ed and accepted b( the project team. Risks associated *ith making changes are thus assessed and documented.

AACSB: Analytic Blooms: Synthesis !earning "b#ective: Change Control Management !evel: *ifficult

224818618-Chap-007

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