Project Mngt Chapter 7

The risk is highest in the earliest phase of the project life cycle.

Opportunity emerges from favorable project circumstances and risk from unfavorable events.

As risk decreases in the project life cycle, opportunity increases.

Risks can be quantified by multiplying the likelihood a failure will occur by the severity of the failure.

Technical risk is the probability that the project will not perform to the required standards or produce substandard products or have excessive operating cost consumption.

The probability that the investments made to fund the front-end activities will be lost due to project abandonment is financing risk.

One approach to risk mitigation is simply to accept it.

Risk cannot be transferred because ultimately your own project will suffer the consequences if the event occurs.

Contingency reserves require a construction company to hold back some funds in an account just in case something happens that increases the overall project cost.

The highest dollar value of reserves is typically task contingency.

The difference between projects that fail and those that are ultimately successful has to do with: A) the plans that have been made to deal with problems as they arise. B) the fact that a successful project doesn't encounter problems. C) whether the project is for an internal or external customer. D) whether the problem is time- or budget-related.

Project risk is highest during the: A) termination stage of the project life cycle. B) concept stage of the project life cycle. C) implementation stage of the project life cycle. D) development stage of the project life cycle.

Project risk is lowest during the: A) concept stage of the project life cycle. B) implementation stage of the project life cycle. C) termination stage of the project life cycle. D) development stage of the project life cycle.

The period of highest risk impact for a project risk exists primarily in the: A) development stage of the project life cycle. B) concept stage of the project life cycle. C) implementation stage of the project life cycle. D) termination stage of the project life cycle.

The greatest project risk occurs when: A) the probability of the event is high and the consequences of the event are high. B) the probability of the event is high and the consequences of the event are low. C) the probability of the event is low and the consequences of the event are high. D) the probability of the event is low and the consequences of the event are low.

The greatest project opportunity occurs when: A) the project is in the concept phase. B) the project is in the development phase. C) the project is in the implementation phase. D) the project is in the termination phase.

The amount a company has at stake in a project rises above the dollar value of opportunity in the: A) implementation phase. B) development phase. C) concept phase. D) termination phase.

Risk and opportunity: A) both increase throughout the project life cycle. B) vary inversely throughout the project life cycle. C) both decrease throughout the project life cycle. D) do not vary throughout the project life cycle.

To protect his poultry from meteorites, the gentleman farmer made hard hats for each bird and installed a meteor detection system that opened umbrellas throughout the yard if a meteor were detected. The safety of his flock thus assured, the farmer was surprised when he read his latest issue of Risk Management Magazine and discovered that this event was: A) high in consequence and high in probability. B) low in consequence and low in probability. C) low in probability and high in consequence. D) high in probability and low in consequence.

Jim knew instinctively that his professor wouldn't appreciate it if he brought his single scoop of vanilla ice cream into the lecture hall with him. He could almost hear the inevitable question, "Did you bring enough for everyone?" To avert such an embarrassment, he practically inhaled his frozen confection as he raced down the hall. He had eaten ice cream in this fashion before and knew he would soon have an ice cream headache, which could be described as: A) high in consequence and high in probability. B) low in consequence and low in probability. C) low in probability and high in consequence. D) high in probability and low in consequence.

While thrilling, there is a chance that you would have an accident if you elected to drive on the Autobahn while blindfolded, an outcome that could be described as: A) high in consequence and high in probability. B) low in consequence and low in probability. C) low in probability and high in consequence. D) high in probability and low in consequence.

Risk management is a: A) three-stage process. B) four-stage process. C) five-stage process. D) six-stage process.

The construction foreman posted a large sign requiring all work site visitors to don a hard hat and safety glasses. He also purchased copious quantities of both items and made them readily available at the entrance. The foreman is engaged in: A) risk identification. B) risk mitigation. C) analysis of probability and consequences. D) control and documentation.

The residents of Enumclaw, Washington, live in the shadow of majestic Mount Rainier and its 26 glaciers. The Cascades form a ring of fire around the Pacific Northwest and erupt with surprising regularity, although Mount Rainier hasn't erupted on a major scale since about a thousand years ago. When it does erupt, the pyroclastic flow (a massive cloud of superheated ash and rock up to 1500 degrees Fahrenheit that can travel at speeds up to 300 miles per hour) will make Enumclaw a less pleasant place to live. City leaders have completed the: A) control and documentation phase of risk management. B) risk identification phase of risk management. C) analysis of probability and consequences phase of risk management. D) risk mitigation strategies phase of risk management.

The mouse executive board meeting was drawing to a conclusion; the only way they would be able to detect the presence of the cat was to tie a bell around its tail. Under their risk management identification scheme, this would fall under: A) commercial risk. B) execution risk. C) financial risk. D) technical risk.

A method for conducting risk factor identification that consolidates the judgments of isolated anonymous respondents is: A) a brainstorming meeting. B) the Delphi method. C) past history. D) multiple assessments.

A method for conducting risk factor identification that generates ideas but doesn't focus on decision making is: A) a brainstorming meeting. B) the Delphi method. C) past history. D) multiple assessments.

One source of information on future risks and the leading indicators that accompany risks is: A) a brainstorming meeting. B) the Delphi method. C) past history. D) multiple assessments.

The terpsichorean was familiar with the risks associated with various moves, the accountant knew financial risks forwards and backwards, while the civil engineer could quantify the risks associated with distributed loads on the temporary stage. Their input was used as part of: A) a brainstorming meeting approach to risk factor identification. B) the Delphi method approach to risk factor identification. C) a past history approach to risk factor identification. D) a multiple assessments approach to risk factor identification.

The probability that project revenues will not be sufficient to repay the debts is: A) financial risk B) cost estimate risk. C) market risk. D) promotion risk.

The probability that funds allocated to the project will be insufficient to complete it is: A) technical risk. B) cost estimate risk. C) financing risk. D) operating risk.

The probability that investments made to fund the front-end activities will be lost due to project abandonment is: A) promotion risk. B) political risk. C) organizational risk. D) financial risk.

There is always a chance that the music loving public cannot be convinced of the need to return to the 8-track format for new releases. The probability that we don't sell one million units before the holiday season is: A) promotion risk. B) market risk. C) organizational risk. D) financial risk.

Based on the projected selling price of $20 per unit, the manufacturer invested a substantial portion of its available cash in a machine that could produce twenty-thousand gumballs in an hour. If consumers weren't willing to pay this much for gum, then the manufacturer faced significant: A) financial risk. B) promotion risk. C) cost estimate risk. D) market risk.

The probability that legal and managerial structures put together to develop and operate the project will not perform well is: A) operating risk. B) political risk. C) organizational risk. D) integration risk.

The probability that a project to establish infrastructure in a third-world country teetering on the brink of civil war is fraught with: A) political risk. B) operating risk. C) organizational risk. D) integration risk.

The marketing team would develop the advertising campaign to promote the newest product but the engineers wanted to keep all product details a secret during development. The service and operations branches of the company were also in the dark, so product rollout was going to be their initiation also. This project has a very high: A) political risk. B) operating risk. C) organizational risk. D) integration risk.

The house had almost been framed when an F-5 tornado ripped across the plains and turned the house back into a lumber pile, not stacked as neatly as it was originally. The homeowner's fears of: A) technical risks had come true. B) operating risks had come true. C) acts of God had come true. D) environmental risks had come true.

The probability that a project will overrun its allocated duration is: A) volume market risk. B) price market risk. C) integration risk. D) schedule risk.

A serious risk factor probably has: A) a high consequence and a medium likelihood. B) a high consequence and a low likelihood. C) a medium consequence and a low likelihood. D) a low consequence and a medium likelihood.

If the risk of a negative outcome is slight, the best course of action might be to: A) minimize it. B) share it. C) transfer it. D) accept it.

The professor wore both a belt and suspenders during lecture each day because he chose to: A) accept risk. B) minimize risk. C) share risk. D) transfer risk.

Fred Knievel took out a substantial life insurance policy before he began his trek across North America in his Volvo. Doing so enabled him to: A) accept risk. B) minimize risk. C) transfer risk. D) share risk.

The Farm Fresh Egg project was too great for one person to pull off. The construction costs for the coop and chicken run were enormous and the sinister threat of avian flu hung over the area like a black cloud. It was only through the combined efforts of Matsushita Chickenworks and the City of Edmond that the project would be undertaken, since they would be able to: A) accept the risk. B) minimize the risk. C) transfer the risk. D) share the risk.

Project penalty clauses that initiate at mutually agreed-on points in the project's development and implementation are: A) liquidated damages. B) milestone adjustments. C) contingency clauses. D) penalty points.

The firm set aside a little extra money just in case an unforeseen element of cost pushed the project beyond what they had budgeted. This extra money is called: A) a rainy day fund. B) a contingency reserve. C) an escalation clause. D) a sinking fund.

You have agreed to paint your neighbor's house a lovely shade of chartreuse for $1500 and discover much to your dismay that the house has a second floor. Now you're faced with the prospect of buying a ladder or scaffolding or a really long handled brush, not to mention the 15 more gallons of paint that will be needed to cover. You won't get another penny for what will surely be increased efforts since your neighbor transferred risk with a(n): A) cost-plus contract. B) contingency reserve. C) fixed price contract. D) inflation clause.

The expected cost of an item that is estimated at $5,000 with a task contingency multiplier of 1.2 is: A) $4,167. B) $5,000. C) $5,200. D) $6,000.

Twenty-thousand dollars was budgeted for the office renovation that had a task contingency multiplier of 1.3. The estimated cost of the task must be: A) about $15,400. B) about $26,000. C) about $22,800. D) about $18,600.

What is the relationship between a project's progress and the level of budget reserves? A) As the project nears completion, the budgeted reserves tend to increase. B) As the project nears completion, the budgeted reserves tend to decrease. C) As the budgeted reserves increase, the project tends to near completion. D) As the budgeted reserves decrease, the project tends to near completion.

The budget safety measures that address higher risks than task contingency are known as: A) CYA factors. B) buffer stocks. C) managerial contingency. D) task offsets.

A common use of managerial contingency funds would be for: A) office supplies. B) management consulting fees. C) a sudden increase in the price of unleaded gasoline. D) an "act of God."

The act of pairing a junior project team member with a senior manager in order to help the junior team member to learn best practices is known as: A) mentoring. B) cross-training. C) supervising. D) interning.

Each project team member had a backup that could fill in at a moment's notice should another team member fall by the wayside. The project was able to mitigate risks in this fashion thanks to an aggressive: A) mentoring program. B) cross-training program. C) duplication program. D) featherbedding program.

A typical risk management report form does NOT answer the question: A) Who? B) What? C) Where? D) Why?

The European Association for Project Management has developed an integrated program of risk management based on efforts to extend risk management to cover a project's entire life cycle. This program is known as: A) EAPM-RM. B) RMEAPM. C) ERM. D) PRAM.

Which of these statements about the project risk analysis and management program is best? A) Risk management is integrated throughout the project's life cycle. B) The risk management strategy should be unwavering throughout the entire project life cycle. C) The project manager should choose a small subset of all risk management tools. D) Risk management is best handled using an ad hoc approach.

Which of these statements about the project risk analysis and management program is best? A) Risk management follows a life cycle much as a project follows a life cycle. B) The risk management strategy should be unwavering throughout the entire project life cycle. C) If a choice between accepting and transferring risk presents itself, risk should be transferred. D) Risk management is best handled using an ad hoc approach.

Which of these statements about the project risk analysis and management program is best? A) If a choice between accepting and transferring risk presents itself, risk should be transferred. B) Different risk management strategies should be deployed at various points in the project life cycle. C) The project manager should choose a small subset of all risk management tools. D) Risk management is best handled using an ad hoc approach.