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2005 Hewlett-Packard Development Company, L.P.The information contained herein is subject to change without notice

GDAS PM Professions:PMP Study Group

Monique Howard

January 8, 2009

Session #10: Risk Management


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1. In your project, you can use all the following tools and techniques for risk responseplanning EXCEPT:

1. Strategies for negative risks or threats2. Contingent response planning3. Strategy for threat and opportunities

4. Strategy for residual risks


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1. In your project, you can use all the following tools and techniques for risk responseplanning EXCEPT:

1. Strategies for negative risks or threats2. Contingent response planning3. Strategy for threat and opportunities

4. Strategy for residual risks

Correct Choice: 4

Justification: Figure 11-14

Reference: PMBOK Third Edition, Page Number: 260


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2. You are the project manager in an automobile manufacturing company. A vendor was sendingyou the machine parts required in your manufacturing process,but the parts did not reachin time because of heavy rains. You had anticipated this risk and planned for it in your riskresponse plan. So, as per your risk response plan, you started using machine parts whichhad been supplied one year ago and were not utilized at that time. However, this hassubjected your project to a new risk - that the machine parts which were not used for one

year might be having higher level of defects.

This new risk can also be called:1. Unidentifiable Risk2. Unmanageable Risk3. Secondary Risk4. Residual Risk


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2. You are the project manager in an automobile manufacturing company. A vendor was sendingyou the machine parts required in your manufacturing process,but the parts did not reachin time because of heavy rains. You had anticipated this risk and planned for it in your riskresponse plan. So, as per your risk response plan, you started using machine parts whichhad been supplied one year ago and were not utilized at that time. However, this hassubjected your project to a new risk - that the machine parts which were not used for one

year might be having higher level of defects.

This new risk can also be called:1. Unidentifiable Risk2. Unmanageable Risk3. Secondary Risk4. Residual Risk

Correct Choice: 3

Justification: Secondary risks that arise as a direct outcome of implementing a risk response.



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3. In your project, you have identified important risks, and planned appropriate responses to therisks. Some risks e.g. possibility of natural disasters have been documented and acceptedin your risk management plan. If there are risks that remain after you have taken thesesteps, then such risks are called:

1. Unidentifiable Risks2. Residual Risks

3. Secondary Risks4. Accepted Risks


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4. Risk Management Planning is the process of deciding how to approach and plan the riskmanagement activities for a project. It is important to plan for the risk managementprocesses that follow to ensure that the level, type, and visibility of risk management arecommensurate with both the risk and importance of the project to the organization. Theoutput of Risk Management Planning is:

1. Risks2. Risk Management Plan3. Risk Ranking of the Project4. Planning Meetings


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3. In your project, you have identified important risks, and planned appropriate responses to therisks. Some risks e.g. possibility of natural disasters have been documented and acceptedin your risk management plan. If there are risks that remain after you have taken thesesteps, then such risks are called:

1. Unidentifiable Risks2. Residual Risks

3. Secondary Risks4. Accepted Risks

Correct Choice: 2

Justification: Residual risks that are expected to remain after planned responses have been taken, as well as those which have

been deliberately accepted.



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4. Risk Management Planning is the process of deciding how to approach and plan the riskmanagement activities for a project. It is important to plan for the risk managementprocesses that follow to ensure that the level, type, and visibility of risk management arecommensurate with both the risk and importance of the project to the organization. Theoutput of Risk Management Planning is:

1. Risks2. Risk Management Plan3. Risk Ranking of the Project4. Planning Meetings

Correct Choice: 2

Justification: Figure 11-3



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5. In your project, you have identified a list of identified risks, a list of potential responses androot causes of risks. You should document this information in the :

1. Risk Management Plan2. Risk Database3. Project Plan4. Risk Register


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5. In your project, you have identified a list of identified risks, a list of potential responses androot causes of risks. You should document this information in the :

1. Risk Management Plan2. Risk Database3. Project Plan4. Risk Register

Correct Choice: 4

Justification: The risk register includes a list of identified risks, a list of potential responses, root causes of risk, and updated risk

categories.



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6. Risk management helps in maximizing the probability and consequences of positiveevents and minimizing the probability and consequences of adverse events to projectobjectives. Risk Response Planning helps in this context because it:

1. helps in deciding how to approach and plan the risk management activities.2. develops procedures and techniques to enhance opportunities and reduce threats to project

objectives.

3. determines which risks might affect the project and documents their characteristics.4. monitors residual risks, identifies new risks and executes risk reduction plans.


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6. Risk management helps in maximizing the probability and consequences of positiveevents and minimizing the probability and consequences of adverse events to projectobjectives. Risk Response Planning helps in this context because it:

1. helps in deciding how to approach and plan the risk management activities.2. develops procedures and techniques to enhance opportunities and reduce threats to project

objectives.

3. determines which risks might affect the project and documents their characteristics.4. monitors residual risks, identifies new risks and executes risk reduction plans.

Correct Choice: 2

Justification: Risk response planning - developing options and actions to enhance opportunities, and reducing threats to projectobjectives.


pmstudy.com comments:* Option 1: This is Risk Management Planning* Option 3: This is Risk Identification* Option 4: This is Risk Monitoring and Control


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7. Utility function is a commonly used technique to find out the tolerance of a project managertowards risk. Some project managers are more averse to risk than others. All of thefollowing are different classifications of tolerance for risk EXCEPT:

1. Risk Averter2. Risk Seeker3. Risk Mitigator4. Risk Neutral


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7. Utility function is a commonly used technique to find out the tolerance of a project managertowards risk. Some project managers are more averse to risk than others. All of thefollowing are different classifications of tolerance for risk EXCEPT:

1. Risk Averter2. Risk Seeker3. Risk Mitigator4. Risk Neutral

Correct Choice: 3

Justification:

Reference: Project Management - A Systems Approach to Planning, Scheduling and Controlling, Page Number: 906


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8. As part of the Risk Management Process, you just created an overall risk ranking of theproject and a list of prioritized risks, identified which risks need additional analysis anddetermined trends in risk analysis results. What should you do next?

1. Analyze the effect of risk events and assign a numerical rating to those risks.2. Create a list of identified risks.3. Determine the fundamental conditions or events that may give rise to identified risk (root causes of

risk).4. Make a list of potential responses to the risks.


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8. As part of the Risk Management Process, you just created an overall risk ranking of theproject and a list of prioritized risks, identified which risks need additional analysis anddetermined trends in risk analysis results. What should you do next?

1. Analyze the effect of risk events and assign a numerical rating to those risks.2. Create a list of identified risks.3. Determine the fundamental conditions or events that may give rise to identified risk (root causes of

risk).4. Make a list of potential responses to the risks.

Correct Choice: 1

Justification: Tasks like creating an overall risk ranking of the project, which includes a list of prioritized risks, identifying which risksneed additional analysis and determining trends in risk analysis results - are all outputs of Qualitative Risk Analysis (PMBOK Page

253). So, the next step is to perform Quantitative Risk Analysis (i.e. analyze the effect of risk events and assign a numerical rating tothose risks) - (PMBOK Page 254)

Please note that Option 2, Option 3 and Option 4 refer to outputs from Risk Identification Phase which has already been completed(PMBOK Page 249)

Reference: pmstudy.com notes as mentioned above


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9. You are in the process of developing options, and determining actions to enhanceopportunities and reduce threats to the project`s objectives. What should you bedoing next?

1. Determining which risks might affect the project and documenting theircharacteristics.

2. Identifying, analyzing and planning for newly arising risks.3. Deciding how to approach and conduct risk management activities for the project.4. Assessing the priority of identified risks using their probability of occurring.


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9. You are in the process of developing options, and determining actions to enhanceopportunities and reduce threats to the project`s objectives. What should you bedoing next?

1. Determining which risks might affect the project and documenting theircharacteristics.

2. Identifying, analyzing and planning for newly arising risks.3. Deciding how to approach and conduct risk management activities for the project.4. Assessing the priority of identified risks using their probability of occurring.

Correct Choice: 2

Justification:"Developing options, and determining actions to enhance opportunities and reduce threats to the project`s objectives" - this is Risk

Response Planning; PMBOK Page 260

"Identifying, analyzing and planning for newly arising risks" - this is Risk Monitoring and Control - PMBOK Page 264. Please note thatthis happens after Risk Response Planning and is the correct answer

The other options happen before Risk Response Planning:

Determining which risks might affect the project and documenting their characteristics (Risk Identification, PMBOK Page 246)Deciding how to approach and conduct risk management activities for the project (Risk Management Planning - PMBOK Page 242)Assessing the priority of identified risks using their probability of occurring (Qualitative Risk Analysis - PMBOK Page 249)


10 Y i th b ild h f th j t B t it h i t l ti i t d


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10. You are in the build phase of the project. But it has run into several unanticipatedproblems. Several risks have surfaced which you had not anticipated earlier. The project isover-budget and behind schedule. What should you do?

1. Create updates to risk response plan2. Create a revised project plan3. Perform risk response audits

4. Perform updated risk identification and analysis

10 You are in the build phase of the project But it has run into several unanticipated


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10. You are in the build phase of the project. But it has run into several unanticipatedproblems. Several risks have surfaced which you had not anticipated earlier. The project isover-budget and behind schedule. What should you do?

1. Create updates to risk response plan2. Create a revised project plan3. Perform risk response audits

4. Perform updated risk identification and analysis

Correct Choice: 4

Justification: Results from an earned value analysis may indicate potential deviation of the project at completion from cost andschedule targets. When a project deviates significantly from the baseline, updated risk identification and analysis should be performed.


11 In your project there is:


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11. In your project, there is:

* 50% probability of $ 40,000 profit* 50% probability of $ 25,000 loss

What is the expected profit in your project?1. $ 32,500

2. $ 25,0003. $ 7,5004. - $ 7,500 (i.e. loss of $ 7,500)


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12. In risk response planning, you are in the process of developing options, and determiningti t d th t t j t` bj ti Wh h th lt f


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actions to reduce threats to your project`s objectives. When you show the results of yourrisk response planning to your project sponsor, she is not comfortable with the risks in theproject and she suggests that the project scope should be decreased. This is an exampleof :

1. Inappropriate risk management because it is having a direct impact on your project scope

2. Risk Avoidance3. Risk Mitigation

4. Risk Transfer

12. In risk response planning, you are in the process of developing options, and determiningti t d th t t j t` bj ti Wh h th lt f


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actions to reduce threats to your project`s objectives. When you show the results of yourrisk response planning to your project sponsor, she is not comfortable with the risks in theproject and she suggests that the project scope should be decreased. This is an exampleof :

1. Inappropriate risk management because it is having a direct impact on your project scope

2. Risk Avoidance3. Risk Mitigation

4. Risk Transfer

Correct Choice: 2

Justification: Risk avoidance involves changing the project management plan to elimiate the threat posed by an adverse risk.... or

to relax the objective that is in jeopardy, such as extending the schedule or reducing scope.


13. In your project, you just conducted a risk data quality analysis to evaluate the degree to whichf f ?


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the data about risks is useful for risk management. What could be a potential next step?

1. Perform a structured review of project plans and assumptions, both at the total project and detailedscope levels

2. Develop checklists for identifying risks based on historical information and knowledge that has beenaccumulated from previous similar projects

3. Conduct planning meetings to develop the risk management plan4. Conduct interviews to quantify the probability and consequences of risks on project activities


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14. You are the project manager of a project which involves oil-exploration in the ocean. Since youcannot plan for all eventualities you establish a contingency reserve including amounts of


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cannot plan for all eventualities, you establish a contingency reserve, including amounts oftime, money or resources to handle known or unknown risks. This is an example of :

1. Risk Avoidance

2. Risk Transfer

3. Active Risk Acceptance

4. Improper Risk Planning since all risks should be identified and accounted for

14. You are the project manager of a project which involves oil-exploration in the ocean. Since youcannot plan for all eventualities you establish a contingency reserve including amounts of


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cannot plan for all eventualities, you establish a contingency reserve, including amounts oftime, money or resources to handle known or unknown risks. This is an example of :

1. Risk Avoidance

2. Risk Transfer

3. Active Risk Acceptance

4. Improper Risk Planning since all risks should be identified and accounted for

Correct Choice: 3

Justification: The most common active acceptance strategy is to establish a contingency reserve, including amounts of time,money or resources, to handle known-or even sometimes potential, unknown - threats or opportunities.


15. Please refer to this Decision Tree which shows the analysis of profit/loss for the twoalternatives (i.e. to build or buy).


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alternatives (i.e. to build or buy).

What is the opportunity cost if the project manager decides to build instead of buy?

1. $ 1,500

2. $ 3,500

3. $ 1,5004. $ 5,000

Correct Choice: 2

Justification: Please refer to the diagram:


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Justification: Please refer to the diagram:

Profit of Build : $ 5,000

Profit of Buy : $ 3,500

Opportunity cost of Build = Profit you give up if you do not buy = $ 3,500



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Wrap Up

Conference#: 702-696-4520 or 866-409-2889

Participant370670831

11 Procurement Management and Tips& Tricks (PMBOK Chapters 12)

January 22 2:00pmEST

Presenter:

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