Question 11: If a risk event has a 90 percent chance of occurring, and the consequences will be US $10,000, what does the US $9,000 represent?
Options:
a) Risk value
b) Present value
c) Expected monetary value
d) Contingency budget
Correct Answer:
c) Expected monetary value
Explanation:
The Expected Monetary Value (EMV) is a fundamental concept in risk management used to quantify the potential financial impact of a risk. It is calculated as:
EMV=Probability of Risk Occurring×Impact/Consequence of the RiskEMV = \text{Probability of Risk Occurring} \times \text{Impact/Consequence of the Risk}EMV=Probability of Risk Occurring×Impact/Consequence of the Risk
Given:
- Probability of risk occurring = 90% or 0.90
- Impact = $10,000
EMV=0.90×10,000=9,000EMV = 0.90 \times 10,000 = 9,000EMV=0.90×10,000=9,000
The US $9,000 represents the Expected Monetary Value (EMV), which quantifies the expected financial outcome of the risk.
Why the Other Options Are Incorrect:
- a) Risk value:
- “Risk value” is a vague term that does not directly refer to EMV.
- b) Present value:
- Present value refers to the current worth of a future sum of money, which is unrelated to risk probabilities.
- d) Contingency budget:
- A contingency budget is a reserve fund set aside to address risks, but it is not calculated as EMV.
Final Answer:
The US $9,000 represents the Expected Monetary Value (EMV), making option c the correct choice.
Question 12: An earthquake damaged your construction project. Your contractor says that he cannot fulfill the terms of the contract due to a specific clause you both had signed in the contract. He is referring to the:
Options:
a) Force majeure clause
b) Fixed price clause
c) Contract obligation terms
d) None of the above
Correct Answer:
a) Force majeure clause
Explanation:
The force majeure clause in a contract protects parties from liability or obligation when extraordinary, unforeseen events occur that are beyond their control. These events, often referred to as “acts of God,” include natural disasters like earthquakes, floods, hurricanes, and other uncontrollable incidents. In this scenario, the contractor is invoking the force majeure clause to explain their inability to fulfill the contractual terms due to the earthquake.
Why the Other Options Are Incorrect:
- b) Fixed price clause:
- A fixed price clause refers to a contract where the price is set and does not change, irrespective of actual costs. This does not relate to unforeseen events.
- c) Contract obligation terms:
- While the contract terms include obligations, they do not specifically address exemptions due to extraordinary events like force majeure.
- d) None of the above:
- The situation directly pertains to the force majeure clause, so this option is invalid.
Final Answer:
The contractor is referring to the force majeure clause, making option a the correct choice.
Question 13: All of the following are ALWAYS inputs to the risk management process EXCEPT:
Options:
a) Historical information
b) Lessons learned
c) Work breakdown structure
d) Project status reports
Correct Answer:
d) Project status reports
Explanation:
The risk management process typically requires certain standard inputs to identify, analyze, and respond to risks. These include:
- Historical information:
- Provides insights into risks from past projects, helping identify potential risks in the current project.
- Lessons learned:
- Documents from previous projects that detail how risks were managed and what challenges were encountered, aiding in risk identification and planning.
- Work breakdown structure (WBS):
- The WBS is critical for risk identification, as it breaks down the project into smaller components, allowing risks to be associated with specific tasks or deliverables.
- Project status reports:
- While useful for monitoring risks during the project lifecycle, they are not always a required input to the risk management process. Status reports focus on current project progress rather than providing foundational input for risk identification or planning.
Final Answer:
The input that is not always required in the risk management process is Project status reports, making option d the correct choice.
Question 14: Risk tolerance is determined to help:
Options:
a) The team ranks the project risks.
b) The project manager estimates the project.
c) The team schedules the project.
d) Management knows how other managers will act on the project.
Correct Answer:
a) The team ranks the project risks.
Explanation:
Risk tolerance refers to the level of uncertainty or risk that stakeholders, including the project team and management, are willing to accept. Determining risk tolerance helps guide the risk management process, particularly in ranking and prioritizing risks. This is essential because:
- Risks with high impact and low tolerance need immediate attention and mitigation strategies.
- Risks with lower impact or higher tolerance may be accepted or monitored without immediate action.
By understanding risk tolerance, the team can effectively rank risks based on their severity and stakeholder acceptance levels, ensuring appropriate focus is given to critical risks.
Why the Other Options Are Incorrect:
- b) The project manager estimates the project:
- Risk tolerance does not directly influence project estimation. It guides decision-making and prioritization during risk management.
- c) The team schedules the project:
- Scheduling is influenced by risk mitigation plans, but determining risk tolerance is not directly related to creating a schedule.
- d) Management knows how other managers will act on the project:
- Risk tolerance does not determine managerial behavior; it is about stakeholder and organizational acceptance of risk.
Final Answer:
Risk tolerance is determined to help the team rank the project risks, making option A the correct choice.
Question 15: You are running a project involving a major corporation and many suppliers of different sizes. Differences in corporate cultures are causing misunderstandings, distrust, and skepticism among stakeholders. What should you try first to integrate the diverse stakeholder groups?
Options:
a) Focus on project work. As a project manager, you should not get distracted by big egos.
b) Let the problems grow further until they are obvious to all. Then escalate them.
c) Develop a joint quality policy for the project and seek commitment from all organizations.
d) Analyze the probability and impact of the risks linked with the situation and plan how to respond to them.
Correct Answer:
c) Develop a joint quality policy for the project and seek a commitment by all organizations.
Explanation:
To address the challenges caused by diverse corporate cultures, misunderstandings, and mistrust, it is essential to establish a shared framework of expectations and goals. Developing a joint quality policy is an effective first step because:
- Creates Alignment: A joint quality policy establishes a common understanding of the project’s objectives, quality standards, and success criteria.
- Encourages Collaboration: It requires input and commitment from all organizations, fostering collaboration and shared responsibility.
- Builds Trust: By involving all stakeholders in the process, it addresses skepticism and helps rebuild trust.
Why the Other Options Are Incorrect:
- a) Focus on project work. As a project manager, you should not get distracted by big egos.
- Ignoring the problem will not resolve it. The situation requires proactive measures to integrate stakeholders, not avoidance.
- b) Let the problems grow further until they are obvious for all. Then escalate them.
- Allowing problems to escalate leads to greater distrust and risks project failure. Early action is critical.
- d) Analyze the probability and impact of the risks linked with the situation and plan how to respond to them.
- Risk analysis is important, but it does not directly address stakeholder alignment or resolve misunderstandings and distrust.
Final Answer:
The best approach is to develop a joint quality policy for the project and seek a commitment by all organizations, making option c the correct choice.
Question 16: You are finding it difficult to evaluate the exact cost impact of a risk. You should evaluate it on a(n):
Options:
a) Quantitative basis
b) Numerical basis
c) Qualitative basis
d) Economic basis
Correct Answer:
c) Qualitative basis
Explanation:
When the exact cost impact of a risk is difficult to determine, it is appropriate to use a qualitative basis for evaluation. The Qualitative Risk Analysis process assesses risks based on their probability and impact using non-numerical methods, such as high, medium, or low ratings. This approach helps prioritize risks for further analysis or action.
Key points:
- Qualitative analysis uses relative terms to evaluate risks when precise data is unavailable.
- It focuses on understanding the nature and potential effects of risks without requiring exact figures.
Why the Other Options Are Incorrect:
- a) Quantitative basis:
- Quantitative analysis involves precise numerical evaluations and is not suitable when the exact cost impact cannot be determined.
- b) Numerical basis:
- Similar to quantitative analysis, numerical evaluation requires specific data, which is unavailable in this scenario.
- d) Economic basis:
- Economic analysis refers to assessing financial implications but does not fit the context of qualitative evaluation.
Final Answer:
When the exact cost impact is difficult to determine, the risk should be evaluated on a qualitative basis, making option c the correct choice.
Question 17: A project manager is quantifying risk for her project. Several of her experts are offsite but wish to be included. How can this be done?
Options:
a) Do a Monte Carlo analysis using the Internet as a tool
b) Apply the critical path method
c) Determine options for recommended corrective action
d) Apply the Delphi Technique
Correct Answer:
d) Apply the Delphi Technique
Explanation:
The Delphi Technique is a structured communication method used to gather input from a group of experts, even if they are remote. It involves:
- Sending a series of questionnaires to the experts.
- Collecting their responses anonymously.
- Summarizing the feedback and redistributing it to the group for further input.
- Repeating the process until consensus is reached.
This technique is particularly effective for risk quantification as it leverages the expertise of multiple individuals while avoiding bias and ensuring inclusion of offsite experts.
Why the Other Options Are Incorrect:
- a) Do a Monte Carlo analysis using the Internet as a tool:
- Monte Carlo analysis is a quantitative technique that requires inputs, but it does not involve expert consensus.
- b) Apply the critical path method:
- The critical path method is used for schedule management, not risk quantification or expert involvement.
- c) Determine options for recommended corrective action:
- Determining corrective actions is part of responding to risks, not quantifying them.
Final Answer:
The best approach to include offsite experts in risk quantification is to apply the Delphi Technique, making option d the correct choice.
Question 18: Being assigned as a project manager, you noticed during project execution that conflicts arise in the team on both technical and interpersonal levels. What is an appropriate way of handling conflicts?
Options:
a) Conflicts distract the team and disrupt the work rhythm. You should always smooth them when they surface.
b) A conflict should be handled in a meeting so that the entire team can participate in finding a solution.
c) Conflicts should be addressed early and usually in private, using a direct, collaborative approach.
d) You should use your coercive power to resolve conflicts quickly and then focus on achieving your goal.
Correct Answer:
c) Conflicts should be addressed early and usually in private, using a direct, collaborative approach.
Explanation:
Effective conflict management is essential to maintaining team productivity and harmony. The best approach to handling conflicts is to address them early, privately, and directly to prevent escalation. A collaborative approach ensures that all parties are heard, underlying issues are resolved, and a mutually agreeable solution is reached.
Why the Other Options Are Incorrect:
- a) You should always smooth them when they surface:
- Smoothing avoids addressing the root cause of the conflict and often leads to unresolved issues resurfacing later.
- b) A conflict should be handled in a meeting so that the entire team can participate:
- While collaboration is important, involving the entire team in every conflict is unnecessary and can disrupt work. Most conflicts are best resolved privately.
- d) You should use your coercive power to quickly resolve conflicts:
- Using coercive power can create resentment, reduce morale, and harm team dynamics, leading to further conflicts.
Final Answer:
The appropriate way to handle conflicts is to address them early and usually in private, using a direct, collaborative approach, making option c the correct choice.
Question 19: During which risk management process is a determination to transfer a risk made?
Options:
a) Identify Risks
b) Perform Quantitative Risk Analysis
c) Plan Risk Response
d) Monitor and Control Risks
Explanation:
The Plan Risk Response process involves developing strategies and actions to address identified risks. This is where the decision to transfer a risk is made. Risk transfer shifts the impact of the risk to a third party (e.g., through insurance, outsourcing, or contracts) while ensuring the project team is still responsible for managing the response strategy.
Why the Other Options Are Incorrect:
- a) Identify Risks:
- The Identify Risks process is where risks are identified and documented, not where responses (like transferring) are decided.
- b) Perform Quantitative Risk Analysis:
- This process quantifies the impact and likelihood of risks but does not involve determining responses.
- d) Monitor and Control Risks:
- This process involves tracking and managing risks, including implementing response strategies, but not determining them.
Final Answer:
The determination to transfer a risk is made during the Plan Risk Response process, making option c the correct choice.
Question 20: When control charts are used, outliers are:
Options:
a) Singular measurements outside the bandwidth between an upper and lower control limit.
b) A typical result of a rare random cause which is difficult to replicate and to verify.
c) Insignificant results, often measurement errors, the causes of which should not be further investigated.
d) Measurements are inconsistent with a run of 7 results over or under a mean value.
Explanation:
In the context of control charts, outliers are individual data points that fall outside the upper or lower control limits (UCL and LCL). These limits are typically set at ±3 standard deviations from the mean. Outliers indicate that the process may be affected by special causes of variation, which should be investigated.
Why the Other Options Are Incorrect:
- b) A typical result of a rare random cause which is difficult to replicate and to verify:
- While outliers can result from special causes, they are not always random or difficult to verify. Investigating outliers can help identify their causes.
- c) Insignificant results, often measurement errors, the causes of which should not be further investigated:
- Outliers should not be dismissed as insignificant. They often indicate issues that require investigation.
- d) Measurements are inconsistent with a run of 7 results over or under a mean value:
- This describes a run rule, not an outlier. A run of 7 consecutive results above or below the mean indicates a potential trend, not singular outliers.
Final Answer:
Outliers in control charts are singular measurements outside the bandwidth between an upper and lower control limit, making option A the correct choice.