1.

Project Risk Management includes all of the following

processes except:
A. Risk Monitoring and Control

B. Risk Identification
C. Risk Avoidance
D. Risk Response Planning
E. Risk Management Planning

2. Using the PMBOK definition of contingency reserve, which

of the following statements about contingency reserves is
false?
A contingency reserve is a separately planned quantity used to allow for future
situations which may be planned for only in part.

Contingency reserves may be set aside for known unknowns

Contingency reserves may be set aside for unknown unknowns
Contingency reserves are normally included in the project's cost and schedule
baselines

3. Which of the following is not a tool or technique used

during the Risk Quantification Process?
Expected monetary value

Contingency planning
Decision Trees
Statistical sums
All of the above are tools and techniques of Risk Quantification

4. Which of the following is true about pure risk?

The risk can be deflected or transferred to another party through a contract or
insurance policy

Pure risks involve the chance of both a profit and a loss

No opportunities are associated with pure risk, only losses
a and c
a and b
5. A contingency plan is
A planned response that defines the steps to be taken if an identified risk event
should occur

A workaround
A reserve used to allow for future situations which may be planned for only in part
a and c
a and b

6. The normal risk of doing business that carries opportunities

for both gain and loss is called:
favorable risk
opportunity risk
pure risk
business risk

7. A risk response which involves eliminating a threat is

called:
Mitigation
Deflection
Avoidance
Transfer
b and d

8. Deflection or transfer of a risk to another party is part of

which of the following risk response categories?
Mitigation
Acceptance
Avoidance
Analysis

9. When should risk identification be performed? (select best

answer)
During Concept Phase
During Development Phase
During Implementation Phase
Risk identification should be performed on a regular basis throughout the
project
10. Which of the following statements is false?
Uncertainty and risk are greatest at the start of the project and lowest at the end
The amount at stake is lowest at the end of the project and greatest at the start
Expected monetary value can be expressed as the product of the risk event
probability and the risk event value
Opportunities are positive outcomes of risk

11. A contingency plan is executed when:

A risk is identified
An identified risk occurs
When a workaround is needed
All of the above
b and c

12. Management reserves are used to handle which type of

risk?
Unknown unknowns
Known unknowns
business risks
pure risks

13. Which of the following techniques accounts for path

convergence and generally estimates project durations more
accurately?
CPM
PERT
Schedule simulation
Path convergence method

14. Most schedule simulations are based on some form of

which of the following?
Delphi
PERT
CPM
Monte Carlo Analysis
15. When should a risk be avoided?
When the risk event has a low probability of occurrence and low impact
When the risk event is unacceptable -- generally one with a very high
probability of occurrence and high impact
When it can be transferred by purchasing insurance
A risk event can never be avoided

16. If a project has an 80% chance of having the scope defined

by a certain date and a 70% chance of obtaining approval for
the scope by a certain date, what is the probability of both
events occurring?
75%
65%
50%
56%
66%

17. The independence of two events in which the occurrence

of one is not related to the occurrence of the other is called:
event phenomenon
independent probability
statistical independence
statistical probability

18. The one document that should always be used to help

identify risk is the:
Risk Management Plan
WBS
Scope Statement
Project Charter
Contingency Plan

19. Risks are accepted when:

You develop a contingency plan to execute should the risk event occur
You accept the consequences of the risk
You transfer the risk to another party
You reduce the probability of the risk event occurring
a and b

20. An example of risk mitigation is:

Using proven technology in the development of a product to lessen the probability
that the product will not work
Purchasing insurance
Eliminating the cause of a risk
Accepting a lower profit if costs overrun
a and b

21. A process that is not part of Project Risk Management is

Identification
Solicitation
Qualitative and Quantitative Analysis
Response Development
Monitoring and Control

22. A response to negative risk event is known as a:

Work item
Work package
Workaround
Work breakdown structure

23. Who is responsible for risk identification, risk

quantification, risk response development, risk response
control?
Project Communications Management
Project Human Resource Management
Project Procurement Management
Project Risk Management
None of the above

24. In summing probability distributions what is the formula

for Mean?
Mean = (a + m + b) / 2
Mean = (a + m + b) / 3
Mean = (a + m + b) / 1
Mean = (a + m + b)3

25. In beta distributions using PERT approximations what is

the formula for Variance?
Variance = [(b - a) / 6] / 2 2
Variance = [(b - a) / 6] / 3 3
Variance = [(b - a) / 6] 3
Variance = [(b - a) / 6] 2

26. When summing the probability distributions if the

distributions are skewed to the __________, the project mean
will always be significantly higher than the sum of the most
likely estimates.
Right
Left
Middle
Not skewed

27. By using Project Risk Management techniques project

managers can develop strategies that do all but which of the
following:
Significantly reduce project risks
Eliminate project risks
Provide a rational basis for better decision making
Identifying risks, their impact(s), and any appropriate responses
None of the above

28. Which phase of the project life cycle typically has the
highest uncertainty and risk associated with it?
Concept
Development
Execution
Conclusion
All of the above

29. Risks classified as unknown (i.e., those which cannot be

identified or evaluated):
Should be deflected to the contracting officer
Should be handled via contingency allowances
Should be ignored since they cannot be identified
Should be ignored, since they are not covered in the Project Risk Assessment
C and D

30. Risks can be divided into two basic types: business risk
and pure (or insurable risk). Of the following, which one(s)
fall(s) under business risk?
Liability Loss
Direct property loss
Profit loss
Personnel-related loss
B and C

31. The type of contract (payment mechanism) chosen for a

project is of the degree of risk associated with completing that
project. For a firm fixed price contract, payment for risks:
Is accomplished by paying the actual costs to the contractor
Is accomplished by paying the contractor for his cost plus a fixed fee (profit)
Is an undisclosed contingency in the contractor's bid
Is accomplished by paying for the budgeted costs of dealing with as predicted in the
Project Risk Assessment
B and C

32. The principles of risk management should be followed

only for:
Complex projects
Simple projects
Large projects
A and C
All of the above

33. Deflection involves the transfer of risk by such means as:

Contracting out to another party
Developing schedule alternatives
Developing discrete organizational functions under the project manager to handle
risk events
Disaster planning and responses
None of the above
34. Risk mitigation involves all but which of the following:
Developing system standards (policies, procedures, responsibility standards)
Obtaining insurance against loss
Identification of project risks
Performing contingent planning
Developing planning alternatives

35. Total Project Risk

should not be calculated for small project
is the probability of each project event times the sum of the consequences of
individual project risk events
is the cumulative sum of the probability of each individual project risk event
times the consequences of occurrence of that risk event
A and B
A and C

36. In Project Risk Management, Risk Response may include

actions to:
reduce the probability of risk events
change the scope, budget, schedule, or quality specifications of the project
reduce the consequences or severity of impacts of a potential risk event
A and C
all of the above

37. "Fast Tracked" project awarded and begun before all

planning and risk assessment information is complete and
available:
May be completed in reduced overall time than other project
Are in a higher risk category than other projects
Are not compatible with project risk assessment
A and B
All of the above

38. Risk event probability is determined as:

The total number of possible events divided into the expectation or frequency
of the risk event
The number of times the risk event may occur
The fraction of the total project tasks which may be affected by the risk event
The total number of possible events divided into the consequences of the risk event
A and D

39. Final risk quantification and modeling normally considers

the impacts of all risks combined and:
Translated the impacts into economic terms for analysis
Concentrated on schedule impacts
May not consider safety and environmental impacts
A and B
A and C

40. Sensitivity Analysis can be used in risk analysis to:

Substitute for uncertainty analysis in risk quantification
Estimate the level of risk aversion adopted by management
Estimate the effect of change of one project variable on the overall project
A and B
All of the above

41. Many companies self-insure against some risks. Problems

which can arise from self-insurance include
failure to reserve funds to handle worst-case scenarios (low probability events)
resulting in severe financial damage to the company
stiff competition from insurance companies
confusion of business risks with insurable risks
A and C
all of the above

42. Using the figure below, what is the probability of success

for project B?
0.30
0.20
0.35
0.15
0.12

43. In performing an impact analysis the most effective tool to

ensure all risks are identified on large projects is the:
Work breakdown structure
Milestone review and schedule technique
Cost / schedule Control system
Planning programming budget system
Program and evaluation review technique

44. Budgeted contingencies can be determined by:

Past experience
Applying standard allowances
Determining the sum total of the most probable variances of the various risk item
properly identified
All of the above
None of the above

45. During which phase of the project life cycle is the amount
at stake lowest?
Concept
Development
Execution
Conclusion
C and D

46. Contingent planning should include all but which of the

following?
The development of a contingency allowance determined by combining
(layering) various estimate segments to form larger estimate segments
The development of schedule alternatives and work-arounds
The management of a contingency budget
An assessment of project shutdown liabilities
A and C

47. Critical variance is best described as

variation beyond which the project will likely fail
the variance resulting from sensitivity analysis
the maximum tolerable variance in any single element of an estimate's bottom
line total cost
the contingency required for a given level of confidence
C and D

48. The Delphi method involves brainstorming as a method of

risk identification.
True
False

49. Your manager has told you that you have a 10% chance of
getting a "1" appraisal and an 80% chance of getting a "2"
appraisal. What are you chances of getting a "3" appraisal?
less than 1%
10%
at least 90%
cannot be determined from this information

50. The single point standard deviations are 3, 5, 10, and 3 for
the critical path. What is the standard deviation for the entire
path?
21
12
143
5.5
impossible to determine without optimistic and pessimistic estimates

51. Mitigating risk could involve

identifying risks, obtaining insurance and developing alternatives
contracting and quality assurance
developing standards, buying insurance, and planning for contingencies and
alternatives
re-scoping the project and reassessing requirements
C and D

52. The 200 million dollar nuclear power plant you have just
built cannot be activated because a pair of rare spotted owls
have just built their nest in your steam tower. You explain this
to the CEO of the utility as
the importance of concern for endangered species
an unknown - unknown
a known - unknown
an occurrence that should be handled via contingency allowances
C and D

53. A manager who says "I'll pay for it, but I want it as soon as
possible" is considered to be
authoritarian
risk accepting
risk averse
in need of a solution
intolerant of basic project management principles

54. If the mean is 3, the mode is 4, the median is 2, the PERT is

6, and one standard deviation is 3, a 95% confidence level is
between
0 and 12
3 and 9
-3 and 9
1 and 7
0 and 6

55. Final risk quantification and modeling normally considers

the impacts of all risks except possibly those due to
producibility
reliability
affordability
acceptability
operability

56. Risk management is defined as the art and science of

_________ risk factors throughout the life cycle of a project.
researching, reviewing, and acting on
identifying, analyzing, and responding to
reviewing, monitoring, and managing
identifying, reviewing, and avoiding
analyzing, changing, and suppressing

57. Project risk is defined as the cumulative effect of the

chances of _________ that will adversely affect project
objectives.
likely events
complex activities
complex schedules
uncertain occurrences
new work

58. The three factors that characterize project risk are

_________.
severity of impact, duration of impact, and cost of impact
identification, type of risk category, and probability of impact
risk event, risk probability, and the amount at stake
occurrence, frequency, and cost
cost, schedule, and quality

59. Risk event is the precise description of what might happen

to the _________ of the project.
manager
detriment
schedule
budget
length

60. In the risk management context, mitigation and deflection

are moth means of _________ the risk to the _________
objectives.
improving; client's
increasing; project's
decreasing; sponsor's
decreasing; project's
decreasing; corporation's

61. Contingency planning is a means to _________ risks to the

project through a formal process and provide the resources to
meet the risk events.
address
classify
assign
resolve
eliminate

62. Suppose a project manager is negotiating with a

subcontractor to provide the installation and integration of a
computer system with data links. The data links must access
three different computer protocols and provide a common
data communication. This integration of the data protocols
has never been accomplished. Since both are attempting to
avoid any risk, the project manager would like to a award a
_________ contract, while the subcontractor would like to sign
only a _________ contract.
letter; formal
fixed-price; cost-plus
cost-plus; fixed-price
no-fault; no-obligation
variable; lump-sum

63. Suppose a project manager of a research and development

contract is charged with building a new radar antenna for an
aircraft. The weight is limited to 12 pounds in the
specification. This represents a major weight reduction over
current systems, which weigh in excess of 26 pounds. Before
starting the project, the project manager should __________.
attempt to cancel the cost-plus contract because the antenna just cannot be built to
the specification
ignore the situation because no one has said the antenna cannot be built to
specification
assess the probability of failing to meet the specification
start work immediately to get most of the hardware fabricated so it can be weighed
to determine the actual weight of the completed antenna
delay and risk assessment until the project is better defined through building
experience

64. Suppose the project manager is evaluating the bids of two

vendors. Each vendor offers to sell similar electronic
components, which are integrated at the vendors site. To
avoid the most risk, the project manager views items such as
the vendor's __________.
price, sales volume, and profit margin
price, promised delivery, and inspection schedule
personnel policies, personnel training program, and price
price, experience, and delivery means
experience, personnel skills, and material control procedures

65. Suppose the project manager must submit a summary risk

assessment to the director of project managers. The
assessment is to be made for each component of a new
electronics system. The project manager submits the
following:
Component A - Low Risk
Component B - Medium Risk
Component C - Moderate Risk
Component D - High Risk
Component E - Medium Risk

The problem with the project manager's risk assessment is

that __________.
the project risk has a full range of risk values
the project risk is normally distributed
the project risk has one high risk assessment that could cause problems
the project risk assessment does not have a uniform evaluation criteria for the
middle risk category
there is no identifiable problem

66. Suppose the project is set at $2,300,000 for the total

project. Some work that must be accomplished has not been
identified in the initial planning. The most appropriate source
of funds to cover this work is the __________.
management reserve
contingency reserve
slush fund reserve
sinking fund
corporate profit

67. Suppose the project manager is planning courses of

action to develop the strategy for the project. Courses "A" and
"B" are both feasible options and can be implemented. Senior
management has directed that risk be considered, but there is
a need to maximize the profit on this project. A decision tree is
used as a valid means for selecting the most profitable option.
Course "A" has a potential profit of $27,500 with a probability
of 0.75 success. Course "B" has a potential profit of $20,800
with a probability of 0.90 success. The course of action that
should be selected is __________.
Course "A" because it has a higher profit potential
Course "B" because it has a higher probability of success
Course "A" because it has an expected value of $36,667 when the probability is
factored into the decision
Course "A" because it has an expected value of $1,905 more than Course "B"
Either course because there is no difference in expected value

68. Suppose the project has many hazards that could easily
injure one or more persons and there is no method of
avoiding the potential for damages. The project manager
should consider __________ as a means of deflecting the risk.
abandoning the project
buying insurance for personal bodily injury
establishing a contingency fund
establishing a management reserve
not acknowledging the potential for injury

69. The primary characteristic that distinguishes external and

internal risk areas is the __________.
magnitude of the impact on the project
project manager's perception of risk
technical nature of the project
use of more or fewer subcontractors
project manager's ability to influence the risk

70. There are two general categories of risk areas, internal and
external. Examples of external risk areas are __________.
schedule delays, cost overruns, and changes in technology
regulatory, project completion, and taxation
natural disasters, regulatory, and design
currency rates, design, and social impact
inflation rates, performance, and schedule delays

71. In the area of legal risks, there are two reasons for
licensing of projects. One reason is for revenue generation by
the community, while the other is for __________.
harassment of the project manager
bureaucratic interest in the project
public safety of the product
monitoring of the project schedule
identification of the project manager

72. Intellectual property rights assigned to an individual by

means of a patent or copyright have value to the owner. Any
infringement on those rights during the implementation of a
project can __________.
cause a lawsuit to be initiated for damages
cause the project to be halted pending a legal determination of property rights
cause damages to be awarded to the holder of a patent
diminish the reputation of the project's parent corporation
all of the above

73. During the conduct of impact analysis for any risk, the
individual performs screening. Screening is for the purpose of
determining whether the risk is __________ the project.
within or outside the scope of
a contingency item for
significant enough to adversely affect
realistic and treatable during implementation of
all of the above

74. Suppose a project of $1.5 million has an adverse event that

has a probability of 0.07 of occurrence and a potential loss of
$15,000. This represents an expected negative value of
__________.
$10,500
$1,050
$105
$15,000
cannot be determined from the available data

75. The assigned values of risk for a project is best

accomplished through a structured methodology that ensures
all project elements are evaluated. The project tool that is best
suited for the structured analysis of the project risk is the
__________.
contract
specification
statement of work
work breakdown structure
linear programming diagram

76. During the assessment of the risk to attempt to quantify

the probability of failure and the amount of potential loss, the
project manager uses the __________ personnel to make the
estimates.
engineering
marketing
experienced
planning
project

77. Suppose during the risk analysis process that one

identified risk event cannot be avoided, mitigated, or insured.
The risk event is a critical item that, if it occurs, could cause
the project to fail. the best option for the project manager is to
__________.
play down the risk because the team will find a means of overcoming any failure
place special emphasis on the risk event to intensely manage that item and all
interfacing items
have the risk assessment team continue to analyze the risk event until it reduces the
expected negative value
continue to search for an insurance company that will assume the risk
ignore the risk assessment because any assigned value is a point estimate that is
never precisely the expected state of nature

78. Suppose during project implementation on a fixed price

contract, the budget for one work package has cost more than
estimated because of an error that required reworking the
task. The cost of materials and labor to rework the task
required is $3,117 more than the budget. The money for this
rework is covered by the __________.
contingency funds
management reserve
overhead charges
profit margin
G&A charges
79. The PERT (Program Evaluation and Review Technique) is a
method of scheduling projects. In the context of risk, PERT is
better than CPM (Critical Path Method) because it deals with
the __________.
logic associated with the cost estimates
logic associated with the schedule estimates
certainly associated with the cost estimates
uncertainty associated with the schedule estimates
certainty associated with the schedule estimates

80. Suppose the project manager establishes a risk model that

will be used on the CALTRON Project. The risk model
identifies the risk events and assigns probabilities of
occurrence. However, what is missing from the risk model is
__________.
nothing. the model is complete
that the risk probabilities need to be summed to determine the total project risk
that the risk events must be labeled as internal or external risks
that the risk events do not address the technology used by the CALTRON Project
that the impact of the risk on the project's objectives has not been assessed and
assigned

81. A high-risk project usually receives the highest priority by

the top management. To effectively manage the project, the
project manager should establish with the top management a
charter that calls for his __________ and the basis for
__________ without prior consultation.
schedule; change
budget; change
responsibilities; managing
resources; obtaining additional resources
obligations; conducting trade-offs

82. High-risk projects are always of concern to senior

management and will receive the most scrutiny. The major
concern of the project manager of a high-risk project is the
tendency for senior management to often __________.
interrupt or intervene in the project's management
avoid or deny the project's potential risk
give low priority to resource allocation
stay informed as to the project's progress
give support to the project when additional resources are requested

83. Risk may be transferred from the owner (buyer) to the

contractor (seller) through a contractual vehicle. the risk
transfer is usually accomplished by the owner awarding a
fixed price contract where the contractor agrees to perform for
a single price. For the owner this simple solution has hidden
costs that include all but __________.
conservatism in design and fabrication
conservatism in scheduling
a focus on the avoidance of liability, rather than the important project issues
an unclear assignment of work because the contractor accepts no performance
criteria
loss of productivity through excessive checking (inspection)

84. Guarantees in a project agreement give some degree of

assurance to the owner (buyer) that the end product will meet
the specified requirements, but they also represent potential
future costs to the contractor (seller), or cost risk, if the
system fails. The four express (as compared to implied)
guarantee categories are __________.
scope, cost, schedule, and quality
design, safety, fabrication, and functional
mechanical, electrical, software, and physical
operational, functional, maintainability, and reparability
design, workmanship, equipment, and performance (process)

85. A project may have an implied warranty that is not

specifically detailed in the contract. This implied warranty
represents potential future costs for failure to meet the
requirements and is a risk to the project. Implied warranties
are usually those associated with __________, which are
spelled out in the Uniform Commercial Code.
conformance to requirements and safety of use
regulatory agency requirements and environmental pollution
lawful use of the product and safety of use
merchantability and fitness for purpose
operability and durability
86. Performance of a contract can bring liabilities that have
implications of risk but are perhaps not as visible as the
stated and implied warranty and guarantee. Two of these
liabilities are __________ infringements.
trade secret and advanced technology
process secret and advanced technology
patent and copyright
trade name and trade secret
design and fabrication

87. Project risk through liability comes in two forms: breach of

contract and a tort. Breach of contract is essentially a failure
to perform the service or provide the required product, while a
tort is a personal wrong such as __________.
an automobile accident
an accident on commercial premises
slander and battery
assault and battery
all of the above

88. Risk of loss may be transferred to an insurance

underwriter by means of an insurance policy. Such policies
state the monetary value of property damage that will be given
for sustained losses. To make an informed decision about
buying insurance, the project manager needs to determine the
ratio of insurance cost and the expected value of the loss. for
example, if the cost of insurance is $10,000, the value of the
property is $200,000, and the probability of loss is 0.05 ( or
five percent), the insurance is __________.
desirable because it will costs less than the probable losses
undesirable because it costs more than the probable losses
indeterminable because of insufficient data
the same as the cost of the probable loss and there is no advantage
none of the above
89. Lease, rental, and hire of equipment for short periods of
time to perform specified project work is a common practice.
The equipment poses __________ unless the contractor
(lessor) __________.
no risk; abuses the equipment beyond fair usage
no risk; assumes title to the equipment during the use period
risk; insures for damages or loss
risk; denies liability during the use period
risk; is insured for the cost of lease, rental, or hire

90. The owner (buyer) of a project usually has the right to

direct changes to the scope of work while the project work is
being accomplished. Often, the owner will orally request a
change and insist that the change be initiated immediately
without the normal documentation (e.g., a change order).
When the change is initiated without documentation,
__________.
the owner assumes all responsibility for paying for the change although he may at a
later date not want the change
the owner assumes responsibility for one-half of the cost of the change until the
documentation is completed and then assumes all at that time
the project manager assumes all risk for the change, if initiated, until the
documentation is received
the project manager assumes only the risk of misinterpreting the owner's oral
change directive, while the owner assumes responsibility for paying for the
requested change
it cannot be determined who is responsible for payment and risk without further
information

91. The probability of failure for a project element is often

called exposure to risk, or risk exposure. This exposure may
be mitigated by taking measures to avoid a particular
approach or use of specific technologies. When the risk
exposure cannot be reduced through selection of another
alternative, the project manager should __________.
conduct further studies and analyses until a more attractive alternative is found
disregard the exposure to risk because nothing can be done
not perform the activities with risk exposure and save the money that would have
been spent on them
hire an independent consultant to manage the risk exposure through extensive
investigations and new technologies
establish a contingency plan to overcome any adverse activity, which may
include a contingency allowance

92. Project risk should be identified and assessed prior to

project initiation during the planning phase. Once the
implementation starts, there is less time to objectively assess
risk and select the more attractive alternatives. During the
implementation there may be indications of risk (i.e., failure to
meet the project's objectives) such as __________.
numerous change orders pending approval
instability of project progress information
conflict between the project manager and customer
loss of focus on the work by line supervisors
all of the above

93. The project manager may realize that some terms of the
contract and project objectives will not be met. It would be
costly and time consuming to meet some specifications. The
project has a high degree of exposure to risk at this point.
Negotiation with the customer to reduce the risk exposure is a
means that __________.
could eliminate all risk to the project and customer at no cost to either party
could redefine the risk exposure to one of opportunities for both the project and
customer
could result in reduced scope for the project and an improved product for the
customer
may cost less to pay penalties and meet a modified specification to meet the
minimum customer requirements
all of the above

94. Demonstration and performance tests are used to prove

the functional and operating characteristics of a deliverable to
the customer. The tests pose a risk when the __________
criteria are selected to demonstrate the capabilities because
__________.
low end; the system will be stressed to meet the minimum requirements and meet
all the customer's requirements
more stringent; the system may meet the requirements but fail the testing
standard; the system will always pass the testing and not fully stress the functions
manufacturer's; the system will always pass the testing and not fully stress the
functions
none of the above

95. Uncertainty is often used in conjunction with the term risk,

implying that uncertainty is risk. Uncertainty is an unknown
situation that may result from a lack of information to
sufficiently quantify the probability of occurrence of an event
and to determine the most likely outcome. Therefore, any
uncertainty that has a potential for a major impact on a project
should be __________.
assigned a risk exposure index of greater than or equal to eight pending further
resolution of the risk exposure
ignored until additional information can be obtained to resolve the actual risk
exposure
studied to determine alternatives that may have a high-risk index but are fully
understood
resolved before project implementation but must be resolved before starting
that area of work
resolved before project implementation or the project must be delayed pending a
better understanding of the situation