Deck 7: Risk Management

Question 1

The PRAM model for risk management proposes that risk management follow a life cycle much as projects follow a life cycle.

Answer 1

False

Question 2

The PRAM model for risk management proposes different risk management strategies be deployed at various points in the project life cycle.

Answer 2

True

Question 3

As risk decreases in the project life cycle,opportunity increases.

Answer 3

False

Question 4

Contingency reserves require a construction company to hold back some funds in an account just in case something happens that increases the overall project cost.

Question 5

The PRAM model for risk management proposes a "pick and choose" approach to risk management.

Question 6

The peak of the combined risk impact curve is during the ________ and ________ phases of the project.

Question 7

Technical risk is the probability that the project will not perform to the required standards or produce substandard products or have excessive operating cost consumption.

Question 8

Risk cannot be transferred because ultimately your own project will suffer the consequences if the event occurs.

Question 9

Opportunity emerges from favorable project circumstances and risk from unfavorable events.

Question 10

Early in the life cycle of a project,both risk and opportunity are ________.

Question 11

The probability that the investments made to fund the front-end activities will be lost due to project abandonment is financing risk.

Question 12

Opportunity and risk are at their peak during the ________ phase of the project.

Question 13

One approach to risk mitigation is simply to accept it.

Question 14

PRAM (project risk analysis and management)should be conducted as a "one-shot" activity during the project planning phase.

Question 15

Risk is a function of the probability of an adverse event occurring and its ________.

Question 16

Every one of the nine phases of the PRAM methodology has a deliverable.

Question 17

The risk is highest in the earliest phase of the project life cycle.

Question 18

Risks can be quantified by multiplying the likelihood a failure will occur by the severity of the failure.

Question 19

The highest dollar value of reserves is typically task contingency.

Question 20

________ is defined as the art and science of identifying,analyzing,and responding to risk factors throughout the life of a project and in the best interests of its objectives.

Question 21

To protect his poultry from meteorites,the gentleman farmer made hard hats for each bird and installed a meteor detection system that opened umbrellas throughout the yard if a meteor were detected.The safety of his flock thus assured,the farmer was surprised when he read his latest issue of Risk Management Magazine and discovered that this event was:

A)high in consequence and high in probability.
B)low in consequence and low in probability.
C)low in probability and high in consequence.
D)high in probability and low in consequence.

Question 22

The first step in the risk management process is ________.

Question 23

A risk impact matrix displays an event's ________ and ________.

Question 24

A rule of thumb for project risk score calculations is that a risk score of ________ is considered high risk.

Question 25

The first step of the Project Risk Analysis and Management program,define,requires that planners make sure the ________ is well-defined.

Question 26

The amount a company has at stake in a project rises above the dollar value of opportunity in the:

A)implementation phase.
B)development phase.
C)concept phase.
D)termination phase.

Question 27

Project risk is lowest during the:

A)concept stage of the project life cycle.
B)implementation stage of the project life cycle.
C)termination stage of the project life cycle.
D)development stage of the project life cycle.

Question 28

A(n)________ process as part of risk mitigation strategies requires a useful documentation system that all partners in the project can access.

Question 29

A common method of transferring the risk of a cost overrun is to establish a(n)________.

Question 30

Risk and opportunity:

A)both increase throughout the project life cycle.
B)vary inversely throughout the project life cycle.
C)both decrease throughout the project life cycle.
D)do not vary throughout the project life cycle.

Question 31

Jim knew instinctively that his professor wouldn't appreciate it if he brought his single scoop of vanilla ice cream into the lecture hall with him.He could almost hear the inevitable question,"Did you bring enough for everyone?" To avert such an embarrassment,he practically inhaled his frozen confection as he raced down the hall.He had eaten ice cream in this fashion before and knew he would soon have an ice cream headache,which could be described as:

A)high in consequence and high in probability.
B)low in consequence and low in probability.
C)low in probability and high in consequence.
D)high in probability and low in consequence.

Question 32

Leave it to the Europeans to develop a fabulous,integrated program of risk management to address the project's entire life cycle.This program is known as ________.

Question 33

An agreement between two firms that has provisions for fixed costs or liquidated damages contains an element of ________

Question 34

There is always a chance that different entities that should work together to complete a project won't be able to do so.This likelihood is called ________.

Question 35

One technique that can be used to identify risk factors associated with a project is ________.

Question 36

The greatest project opportunity occurs when:

A)the project is in the concept phase.
B)the project is in the development phase.
C)the project is in the implementation phase.
D)the project is in the termination phase.

Question 37

The greatest project risk occurs when:

A)the probability of the event is high and the consequences of the event are high.
B)the probability of the event is high and the consequences of the event are low.
C)the probability of the event is low and the consequences of the event are high.
D)the probability of the event is low and the consequences of the event are low.

Question 38

Project risk is highest during the:

A)termination stage of the project life cycle.
B)concept stage of the project life cycle.
C)implementation stage of the project life cycle.
D)development stage of the project life cycle.

Question 39

The difference between projects that fail and those that are ultimately successful has to do with:

A)the plans that have been made to deal with problems as they arise.
B)the fact that a successful project doesn't encounter problems.
C)whether the project is for an internal or external customer.
D)whether the problem is time- or budget-related.

Question 40

The period of highest risk impact for a project risk exists primarily in the:

A)development stage of the project life cycle.
B)concept stage of the project life cycle.
C)implementation stage of the project life cycle.
D)termination stage of the project life cycle.

Question 41

A serious risk factor probably has:

A)a high consequence and a medium likelihood.
B)a high consequence and a low likelihood.
C)a medium consequence and a low likelihood.
D)a low consequence and a medium likelihood.

Question 42

A method for conducting risk factor identification that consolidates the judgments of isolated anonymous respondents is:

A)a brainstorming meeting.
B)the Delphi method.
C)past history.
D)multiple assessments.

Question 43

The probability that funds allocated to the project will be insufficient to complete it is:

A)technical risk.
B)cost estimate risk.
C)financing risk.
D)operating risk.

Question 44

A method for conducting risk factor identification that generates ideas but doesn't focus on decision making is:

A)a brainstorming meeting.
B)the Delphi method.
C)past history.
D)multiple assessments.

Question 45

The probability that project revenues will not be sufficient to repay the debts is:

A)financial risk
B)cost estimate risk.
C)market risk.
D)promotion risk.

Question 46

The construction foreman posted a large sign requiring all work site visitors to don a hard hat and safety glasses.He also purchased copious quantities of both items and made them readily available at the entrance.The foreman is engaged in:

A)risk identification.
B)risk mitigation.
C)analysis of probability and consequences.
D)control and documentation.

Question 47

The probability that investments made to fund the front-end activities will be lost due to project abandonment is:

A)promotion risk.
B)political risk.
C)organizational risk.
D)financial risk.

Question 48

The residents of Enumclaw,Washington,live in the shadow of majestic Mount Rainier and its 26 glaciers.The Cascades form a ring of fire around the Pacific Northwest and erupt with surprising regularity,although Mount Rainier hasn't erupted on a major scale since about a thousand years ago.When it does erupt,the pyroclastic flow (a massive cloud of superheated ash and rock up to 1500 degrees Fahrenheit that can travel at speeds up to 300 miles per hour)will make Enumclaw a less pleasant place to live.City leaders have completed the:

A)control and documentation phase of risk management.
B)risk identification phase of risk management.
C)analysis of probability and consequences phase of risk management.
D)risk mitigation strategies phase of risk management.

Question 49

One source of information on future risks and the leading indicators that accompany risks is:

A)a brainstorming meeting.
B)the Delphi method.
C)past history.
D)multiple assessments.

Question 50

The mouse executive board meeting was drawing to a conclusion;the only way they would be able to detect the presence of the cat was to tie a bell around its tail.Under their risk management identification scheme,this would fall under:

A)commercial risk.
B)execution risk.
C)financial risk.
D)technical risk.

Question 51

While thrilling,there is a chance that you would have an accident if you elected to drive on the Autobahn while blindfolded,an outcome that could be described as:

A)high in consequence and high in probability.
B)low in consequence and low in probability.
C)low in probability and high in consequence.
D)high in probability and low in consequence.

Question 52

The marketing team would develop the advertising campaign to promote the newest product but the engineers wanted to keep all product details a secret during development.The service and operations branches of the company were also in the dark,so product rollout was going to be their initiation also.This project has a very high:

A)political risk.
B)operating risk.
C)organizational risk.
D)integration risk.

Question 53

The terpsichorean was familiar with the risks associated with various moves,the accountant knew financial risks forwards and backwards,while the civil engineer could quantify the risks associated with distributed loads on the temporary stage.Their input was used as part of:

A)a brainstorming meeting approach to risk factor identification.
B)the Delphi method approach to risk factor identification.
C)a past history approach to risk factor identification.
D)a multiple assessments approach to risk factor identification.

Question 54

The house had almost been framed when an F-5 tornado ripped across the plains and turned the house back into a lumber pile,not stacked as neatly as it was originally.The homeowner's fears of:

A)technical risks had come true.
B)operating risks had come true.
C)acts of God had come true.
D)environmental risks had come true.

Question 55

Based on the projected selling price of $20 per unit,the manufacturer invested a substantial portion of its available cash in a machine that could produce twenty-thousand gumballs in an hour.If consumers weren't willing to pay this much for gum,then the manufacturer faced significant:

A)financial risk.
B)promotion risk.
C)cost estimate risk.
D)market risk.

Question 56

The probability that a project to establish infrastructure in a third-world country teetering on the brink of civil war is fraught with:

A)political risk.
B)operating risk.
C)organizational risk.
D)integration risk.

Question 57

There is always a chance that the music loving public cannot be convinced of the need to return to the 8-track format for new releases.The probability that we don't sell one million units before the holiday season is:

A)promotion risk.
B)market risk.
C)organizational risk.
D)financial risk.

Question 58

Risk management is a:

A)three-stage process.
B)four-stage process.
C)five-stage process.
D)six-stage process.

Question 59

The probability that legal and managerial structures put together to develop and operate the project will not perform well is:

A)operating risk.
B)political risk.
C)organizational risk.
D)integration risk.

Question 60

The probability that a project will overrun its allocated duration is:

A)volume market risk.
B)price market risk.
C)integration risk.
D)schedule risk.

Question 61

You have agreed to paint your neighbor's house a lovely shade of chartreuse for $1500 and discover much to your dismay that the house has a second floor.Now you're faced with the prospect of buying a ladder or scaffolding or a really long handled brush,not to mention the 15 more gallons of paint that will be needed to cover.You won't get another penny for what will surely be increased efforts since your neighbor transferred risk with a(n):

A)cost-plus contract.
B)contingency reserve.
C)fixed price contract.
D)inflation clause.

Question 62

A project team assesses their primary risk factor's probability of failure with a maturity risk of 0.2,a complexity risk of 0.6,and a dependency risk of 0.9.The probability of failure is:

A)less than or equal to 0.3.
B)greater than 0.3 but less than or equal to 0.6.
C)greater than 0.6 but less than or equal to 0.9.
D)greater than 0.9.

Question 63

A project team assigns probabilities of 0.1,0.3,and 0.6 respectively to the maturity,complexity,and dependency categories.The probability of failure can be calculated as:

A)0.02.
B)0.45.
C)0.33.
D)0.57.

Question 64

A project has identical probability of failure and consequence of failure values.What must these values be if the overall risk factor is at the low end of the high risk category?

A).234
B).387
C).452
D).591

Question 65

Fred Knievel took out a substantial life insurance policy before he began his trek across North America in his Volvo.Doing so enabled him to:

A)accept risk.
B)minimize risk.
C)transfer risk.
D)share risk.

Question 66

Project penalty clauses that initiate at mutually agreed-on points in the project's development and implementation are:

A)liquidated damages.
B)milestone adjustments.
C)contingency clauses.
D)penalty points.

Question 67

If the risk of a negative outcome is slight,the best course of action might be to:

A)minimize it.
B)share it.
C)transfer it.
D)accept it.

Question 68

With a cost factor of 0.1,a schedule rating of 0.3,a reliability rating of 0.5,and a performance rating of 0.3,the overall consequence of failure was:

A)0.2 for the squidproofing project.
B)0.3 for the squidproofing project.
C)0.4 for the squidproofing project.
D)0.5 for the squidproofing project.

Question 69

The Farm Fresh Egg project was too great for one person to pull off.The construction costs for the coop and chicken run were enormous and the sinister threat of avian flu hung over the area like a black cloud.It was only through the combined efforts of Matsushita Chickenworks and the City of Edmond that the project would be undertaken,since they would be able to:

A)accept the risk.
B)minimize the risk.
C)transfer the risk.
D)share the risk.

Question 70

With the failure probability and consequence scores shown in the table,compute the overall risk factor for the project.

A)less than or equal to 0.3
B)greater than 0.3 but less than or equal to 0.4
C)greater than 0.4 but less than or equal to 0.5
D)greater than 0.5

Question 71

The professor wore both a belt and suspenders during lecture each day because he chose to:

A)accept risk.
B)minimize risk.
C)share risk.
D)transfer risk.

Question 72

The expected cost of an item that is estimated at $5,000 with a task contingency multiplier of 1.2 is:

A)$4,167.
B)$5,000.
C)$5,200.
D)$6,000.

Question 73

Use the failure probability and consequence scores shown in the table to determine the consequence of failure for the project.

A)greater than 0.6
B)less than or equal to 0.6 but greater than 0.4
C)less than or equal to 0.4 but greater than 0.2
D)less than 0.2

Question 74

The firm set aside a little extra money just in case an unforeseen element of cost pushed the project beyond what they had budgeted.This extra money is called:

A)a rainy day fund.
B)a contingency reserve.
C)an escalation clause.
D)a sinking fund.

Question 75

With a maturity risk of 0.3,a complexity risk of 0.2,and a dependency risk of 0.2,the probability of failure is:

A)about 0.23.
B)about 0.7.
C)about 0.012.
D)about 0.45.

Question 76

The project team toiled long into the night to develop consequence of failure scores and probability of failure scores as indicated below.What is the overall risk factor for the project?

A)less than or equal to 0.6
B)greater than 0.6 but less than or equal to 0.7
C)greater than 0.7 but less than or equal to 0.8
D)greater than 0.8

Question 77

It was well known that the cost of failure category for cost was a 0.7,and for schedule was a 0.8.The project team settled on the cost of failure for reliability of 0.6,and for performance of 0.4.What is the overall consequence of failure?

A)less than or equal to 0.5
B)greater than 0.5 but less than or equal to 0.6
C)greater than 0.6 but less than or equal to 0.7
D)greater than 0.7

Question 78

Use the failure probability and consequence scores shown in the table to determine the overall risk factor for the project.Based on your analysis,the overall project has a(n):

A)low risk.
B)medium risk.
C)high risk.
D)unacceptable risk.

Question 79

The consequences of failure categories of cost,schedule,reliability,and performance were believed to be 0.2,0.6,0.5,and 0.7.What is the overall consequence of failure?

A)0.2
B)0.3
C)0.4
D)0.5

Question 80

Twenty-thousand dollars was budgeted for the office renovation that had a task contingency multiplier of 1.3.The estimated cost of the task must be:

A)about $15,400.
B)about $26,000.
C)about $22,800.
D)about $18,600.