Question 1

Which of the following are ways of transferring risk?

Accepted Answer

Insurance, warranties and outsourcing are all risk transfer methods. Eliminating the threat and reducing the impact are forms of avoidance and mitigation respectively.
Key Takeaway: It's intelligent as a project manager to outsource tasks sometimes to those who can handle it with more confidence. If your organization is uncertain of its competency in a task, outsourcing transfers the risk to someone who can handle it better.

Question 2

The project planning process involves a lot of redundancy, checking and reviewing of plan details; however, to be most effective you shouldn't publish your proposed project plan until after this important step:

Accepted Answer

You should wait until risk management principles have been applied to your project before revisiting your plan, since it's only at this stage that the final project price tag and timeline can be determined.
Segmenting the WBS, receiving resource commitments, and creating the project budget all happen in the planning phase, but before risk assessment.
Key Take Away: Half of executives in a particular survey believed their company lacked discipline with respect to project management. Don't be among this 50%. It's important to follow-through on all aspects of your project plans at the appropriate time.

Question 3

A contingency reserve should be a specific percentage of each budget:

Accepted Answer

Contingency reserve is tied to risks identified ("If X event occurs, a certain amount can be taken out of reserve to deal with it"). As such, it should be an amount that reflects the inherent risk of possible events. This is a tough true/false question to drive home that exact point.
Key Takeaway: For example, after risk identification, one project might be much riskier than another. This one should probably have a larger contingency reserve.

Question 4

Jack is concerned about slack. His project at the corporate offices of Taco Shack is catching flack, because it might be off track, and impact his delivery date. Given that, which type of slack best represents the above?

Accepted Answer

Since Jack's project's delivery date is in question, the total float (slack), or amount of time the project can withstand a delay, is impacted. There is no such thing as a near-critical path float. Sorry, we made that up to make you go "Hmmmm." It sounds like a project management term though, doesn't it? The project float speaks to the amount of time a project can withstand a delay before it's externally imposed target date is impacted. The free float concerns the amount of time an activity can withstand a delay before it impacts the following activity.
Key Take Away: We can't stress enough the importance of knowing how to float - literally and figuratively speaking! Systematically analyze risk to build sufficient (but not excessive) float into your projects to manage risk and delivery date expectations.

Question 5

Which component of the "Triple Constraint" concept is part of the newer, expanded definition of this term according to the PMI?

Accepted Answer

Cost, time and scope are part of the original definition of the "Triple Constraint" concept.
Risk, quality and customer satisfaction have been added on over the years as the definition expanded. So while there may be multiple constraints, it's still known affectionately as the "Triple Constraint." (We know, confusing.)
Key Take Away: In project management circles, there are instances where triple means more than 3. This is one of them.

Question 6

Once the Project Manager completes the schedule network analysis, the risk that is identified must be cared for within the project schedule. What type of formats are permissible ways to show logical relationships?

Accepted Answer

The project schedule can be shown in network diagram format. In addition, the bar or milestone chart is also an acceptable way to indicate possible dependencies. Risk must be indicated in the project plan. Once risk is planned for, it is no longer risk, but an issue that is managed through.
Key Takeaway: Having a schedule network analysis available will allow the Project Manager to monitor the status of the project. At any given moment, the Project Manager can intelligently explain and give current status and what is needed to complete the project. Once any risk to the original plan is found, the Project Manager can re-work the plan based on the needs that are revealed.

Question 7

Ted is negotiating a 10 year contract with the US government to provide educational services. The government wants a fixed price project. However, Ted is extremely concerned about the possibility of inflation given the increase in government spending. Ted should suggest what type of contract?

Accepted Answer

A fixed price with economic price adjustment contract allows for fees to be adjusted based on an established index (usually of inflation).
Key Take Away: Vendors signing multi-year contracts are crazy not to include this. Even if inflation or cost increases don't appear to be on the horizon, it is an unnecessary risk to be exposed to. In general, this is an accepted practice to protect project profits.

Question 8

What is a potential downside to a Fixed Price contract with a vendor if you are buying services? Select all that apply.

Accepted Answer

With a fixed price contract, the vendor performing the services has the cost risk and has an incentive to keep the prices of the materials used down. Additionally, they may price in an initial margin of safety so they can be absolutely sure they will make money on the project.
B, is the opposite of A and is not true as controlling material costs will be in the vendor's best interest in this case. C is not true as finishing the project on time is a key criteria for project success and the vendor's reputation. Also, if the project goes too long, this will impact the project's financial success for them.
Key Takeaway: With a fixed price project, it's important the project manager ensure that the vendor delivers quality services using the right resources and materials. Ideally, these would be stipulated clearly in the contract.

Question 9

Jerry has been asked to be very diligent about risk management since his new company has experienced rather involved complications before. Which best exemplifies good risk management?

Accepted Answer

Good risk management is not installing quick and easy risk management solutions despite what the software sales pitch says. Good software will typically just organize and track a diligent project manager's proactive thinking about risk.
Good risk management is comprised of the other 3 bullets above: analyzing, planning and monitoring project variables, increasing the possibility of good project outcomes, and decreasing the possibility of bad project outcomes.
Key Take Away: Experienced project managers know that preparing for the worse case scenarios, is good business practice, and is a must for all firms across all industry types.

Question 10

Projects that involve two-sided communication tend to advance with fewer issues and risks. Which answer best exemplifies two-sided communication for Project Janus?

Accepted Answer

Offering to help a team member who is struggling is the best answer and exemplifies a proactive, two-sided communicative stance.
Reporting out via email is a standard, typically uni-directional form of communication to a project's stakeholders.
Delivering a hard copy status report to each member's desk doesn't imply any feedback from members.
By definition, asking to be included in meetings for a project outside of the scope of your current project is not beneficial. After all, if it were, it would be in scope!
Key Take Away: Two-sided communication is not only about giving and receiving important information that can impact all aspects of a project, but is also about acting on that information in a way that best serves the project.
Janus is a two-faced god in Roman mythology. He was the God of doors, gates and beginnings/endings. Janus had one good face and one evil face and the expression is sometimes a derogatory one for someone who puts on a good front but behaves badly or unethically when no one is looking (a two-faced liar). We thought this would be a helpful memory heuristic for two-sided communication, though being two-faced obviously isn't a good thing.

Question 11

For which of the following can you have a baseline?

Accepted Answer

All of the above. The most common performance baselines are cost and schedule. However, it's possible to have them for quality and technical performance as well. Technical baselines are especially common in R&D projects. Baselines are a basis of comparison for measuring the performance of the project.
Key Takeaway: Generally, as a project manager, you should be outperforming your project baselines. That does not mean to leave slack in them when you create them, but rather make a good estimate that accounts for risks that may knock you off schedule or cost and then manage those risks well.

Question 12

Hector the Projector is in the quantitative risk assessment portion of the process. Which is a productive example of this phase of the process?

Accepted Answer

The best answer would be determining the probability that the project will meet its goals successfully.
Other good examples of quantitative risk assessment would be identifying risks that have the most (not least) impact, determining costs for predictable (not unforeseeable) events, as well as costs for each project task.
Key Take Away: It's always good to think quantitatively, especially in dollar terms. Multiply probability by the cost of a risk occurring and you have the best insight into how much you should be worried about it.

Question 13

Lena is in the midst of assessing risk on her process re-engineering project. Which might she use to perform a qualitative assessment of identified risks in her project?

Accepted Answer

Lena must utilize only dependable, detailed data to perform an effective qualitative assessment of her risks. One of the best ways to gather this is by performing interviews and documenting them.
Partial historical data, spotty data, and second-hand information are not reliable or detailed sources of information.
Key Take Away: Advanced Project Managers realize that how many ranks their risks is almost important as identifying them in the first place. If a Project Manager doesn't have a method to tackle the risks with the highest risk level first, then the assessment phase is a failure. One must carry the process through all phases to realize the benefits of effective risk management.

Question 14

The managers at Static Inc. have been carrying out business the same way for the last ten years. However, they've taken on a new customer who wants to see newer technology being employed. Static Inc. management is constantly challenging the newly hired, experienced project manager who is trying to deploy the new system as best he can. What is the biggest risk to this project, based on the above?

Accepted Answer

Based on the above passage, the managers' resistance to change is imparting the biggest risk. Other risks could certainly include technology, the skills of the Project Manager, and the schedule, especially if it's a tight one. Identifying stakeholders that are resistant to change early on is essential.
Key Take Away: Resistance to change needs to be indentified early. Specific tactics, such as taking extra time to articulate the benefits of a new technology, must be used early and often to persuade people resistant to change that it's in their best interest.

Question 15

For risk management to be as cost and time effective an exercise as possible, when should the risk identification process begin?

Accepted Answer

The most effective time to begin risk assessing is after a scope statement and WBS have been created.
Some inexperienced managers begin when a project is first mentioned, while others try to begin before the scope statement and WBS have been created; however the most effective time is after the scope has been identified and a detailed WBS made available. Before then, the project is too fluid and time is not well invested. Risk is continually assessed throughout the project cycle, even during project changes.
Key Take Away: One of the key tenets of project management is time management - using one's time to obtain the maximum benefit. One can start early in the process in analyzing risk, but you need to ask yourself is this an effective use of my time or am I better off waiting?

Question 16

What should a risk register include?

Accepted Answer

A well-executed risk register should contain information on the specific risks, what is being done to do with it (or how it would be dealt with if it occurred, some analysis of the overall impact, and perhaps a categorization (useful on big projects with many risks).
Key Take Away: A risk register serves a centralized repository for risk management. Any newly identified risks should be added, and the document should be periodically reviewed and updated.

Question 17

Julie has decided to gather opinions from a group of external consultants, via a short questionnaire, who are experienced with these types of projects within the publishing industry. She'll then show them an aggregated list of the whole group's answers, and ask them if they want to change theirs.What best describes the technique Julie is utilizing to gather valuable information for her project?

Accepted Answer

The Delphi method leverages panel of independent experts. These experts answer questionnaires anonymously, and then the answers are shared amongst the entire group. Once the experts have reviewed the opinions of others, there is another questionnaire that encourages them to change their answers based on having read the opinions of their peers. These experts should begin to converge on an answer that serves as a nice approximation.
Root cause analysis is a technique that looks at all factors closely to try to uncover the primary cause of an issue.
Interviewing involves questioning participants to get pertinent project information, while brainstorming is an off-the-cuff process that relies on people gathering together to throw out random ideas.
Key Takeaway: The Delphi technique is a very effective way to estimate an expert consensus. Whatever the techniques used to gather information, it is imperative for Project Managers to properly document the outcomes of these techniques, and to share those results with the other project participants. In that way, you have many more neurons reviewing the information for potential risks.
However, the Delphi technique tends to be time-consuming, so it is generally used for very important estimates on projects that tend to be larger in size.

Quiz 1: Risk Management