Question 1

Which of the following is a key input into the risk evaluation and control process?&#10;A)Testing plan&#10;B)Organizational tolerance for risk&#10;C)Change control process&#10;D)PMIS&#10;E)Marginal analysis

Accepted Answer

The organization's tolerance for risk must be understood by the BCP to properly execute the risk evaluation and control process.
Key Takeaway: Discussions with senior management, risk officers, operations and legal counsel are good places for a planner to start.

Question 2

Which of the following can you use a Monte Carlo simulation to model? Select all that apply:&#10;A)Project cost&#10;B)Probability of failure&#10;C)Quality of inputs&#10;D)Stock market returns&#10;E)Leadership

Accepted Answer

Yes, you can use a Monte Carlo simulation to model stock returns, as well as cost and probability of failure. It cannot however, tell you anything about the quality of the inputs used to arrive at the results of the simulation.
Key Takeaway: a Monte Carlo simulation is a great tool for modeling financial and risk outcome in probabilistic situations than project management. For instance, one Upward Mobility editor used it to model the probability that an airline would go bankrupt due to plane crashes with various insurance policies.

Question 3

A team member identifies a risk which is not listed in risk register. If the risk materializes, then the project will be delayed by 6 months. What should the PMO do in this situation?&#10;A)Immediately inform customer&#10;B)Find out how the team member identified the risk, as all of them were identified during project planning&#10;C)Prepare a risk mitigation plan&#10;D)Analyze the risk&#10;E)File a change control request

Accepted Answer

Analyze the risk before deciding what to do. The actions required to mitigate a problem are done after analysis of the risk is done. Whenever a new risk is identified, the first and foremost action should be to analysis the probability of risk materializing, impact of the risk and factors associated with the same.
Key takeaway: New risks should be identified all the time. A good BCP reacts calmly and analytically. First gather all the relevant information, and then analyze and choose the appropriate course of action.

Question 4

Insurance is a way of transferring risk.

Accepted Answer

Insurance is inherently about transferring risk. By aggregating individual risks into a pool, insurance companies can protect individual people and firms against risk. This is at a cost, of course.
Key Takeaway: There are other ways to transfer risk, such as putting clauses in contracts, but insurance is one of the most effective ways to manage risk. This is especially case for external risk, which should always be carefully analyzed.

Question 5

What are the four options for dealing with a risk?&#10;A)Accept, mitigate, transfer and avoid&#10;B)Accept, insure, transfer and avoid&#10;C)Accept, mitigate, reduce and avoid&#10;D)Situation, task, action, result&#10;E)It's a trick question -- there are only three and they are transfer, mitigate and avoid

Accepted Answer

Accept, mitigate, transfer and avoid are the four acceptable ways of dealing with risk. Remember that mitigating and reducing are synonyms in risk management, and that insuring is a form of transferring risk.
Key Takeaway: We want you to remember these four options and consider them each time you contemplate what to do with a risk. Our natural tendency is to avoid or mitigate, but sometimes that is not possible.

Question 6

Boris has identified a key risk in a new project he is leading. What are the acceptable ways to deal with this risk?&#10;A)Analyze the risk then do nothing.&#10;B)Invest resources to monitor the specific risk.&#10;C)Pay another contractor to execute a piece of the project that seems risky with a penalty if they fail.&#10;D)Pay an insurer to compensate the company with a cash payment if the risk does not work out.&#10;E)Ignore the risk

Accepted Answer

These are all acceptable options as long as you have properly analyzed the risk and decided that it is the best decision. Corporations must take risks to be successful.
Key Takeaway: The first time most people get asked this question, they often think doing nothing is not an option. In some cases, risks are so small in their expected value that they should be ignored and accepted. So global thermonuclear holocaust may be a risk for your company, but it should probably just be accepted. In other cases, insurance or outsourcing may be too expensive, and there may be no possible mitigation strategies, so you must decide with your stakeholders whether to accept the risk and proceed with the project.

Question 7

According to some studies, by utilizing effective risk management techniques, what percentage of risks can be curtailed?&#10;A)50%&#10;B)10%&#10;C)25%&#10;D)90%&#10;E)100%

Accepted Answer

According to studies, it is believed that up to 90% of risks can be eliminated through effective risk management techniques. We're sure this varies from project to project, but we included this question to emphasize the value that can be created by good risk management practices.
Key Take Away: . The last 10% can be accepted or transferred. At the end of the day, if we only proceeded with things that had zero risk, nothing would get done.

Question 8

A retail chain decides to outsource integration of its POS system with inventory tracking system. This is an example of risk ___________:&#10;A)Reward&#10;B)Sharing&#10;C)Avoidance&#10;D)Retention&#10;E)Identification

Accepted Answer

Outsourcing is generally an example of risk sharing. Who bears what risk is often determined in the contracting process.
Key takeaway: Since the accountability is passed onto the vendor (at a cost), the risk gets shared amongst contracting parties. Since the firm hired generally has expertise, the overall risk is lower.

Deck 9: Risk Evaluation Control