Risk Management Practice Questions

Answer Rationale
1.

Answer option b. This question requires that you calculate the Expected Monetary Value
(EMV), which is: EMV = Probability x Impact. In the problem, "90 percent chance of
occurring "is the Probability, while "impact will be $10,000" is obviously the impact.
Therefore: EMV = 0.9 x $10,000
= $9,000, which is answer option b., the "Expected value."

2.

Answer option d. Answer options a., b., and c. are all characteristics of the Delphi method.
Option d., however, which states that "the facilitator will terminate the process only when
a majority of opinion is achieved," is incorrect because a major objective of the method is
unanimity of opinion, not a majority of opinion.

3.

Answer option d. A risk may be either negative or positive. Therefore, a "business risk" without being defined as either strictly positive or negative - "has the potential for both
gain and loss," as stated in answer option d.

4.

Answer option b. The Plan Risk Management process precedes all other Risk Management
area processes, as clearly stated in the PMBOK and the Slide Presentation. Answer option
b., "Planning," is the obvious choice

PMP Exam Complete Training Course Material-Master of Project Academy

Not for distribution, sale or reproduction. Cannot be used without permission of the Author.
1

5.

Answer option d. On page 348 of the PMBOK is a list of the Project Document Updates
that are an Output of the Perform Quantitative Risk Analysis process. In this list it is
stated: "Contingency reserves...are calculated based on the quantitative risk analysis of
the project and the organization's risk thresholds." To reiterate, then, the Perform
Quantitative Risk Analysis process provides the data on which cost contingency reserves
are based. This data is first progressively elaborated back into the Risk Register, which
may then serve as Input to the Estimate Costs process, where cost contingency reserves
are developed. In this problem, answer option d., "Facilitate the quantification of cost
contingencies," is the only option that speaks to this "key objective of risk quantification."

6.

Answer option b. As shown on page 309 of the PMBOK and, most importantly, based on
the flow of Outputs-Inputs, the correct order or sequence of the Risk Management
processes are: Plan Risk Management, Identify Risks, Perform Qualitative Risk Analysis,
Perform Quantitative Risk Analysis, Plan Risk Responses, and Control Risks - or, as listed in
answer option b., "Planning, identifying, analyzing, response planning, and controlling."

7.

Answer option a. A "risk event" may be a positive risk (opportunity) or a negative risk
(threat). If it happens to be positive, it would be correct to say that it is "the precise
description of what might happen to the benefit of the project." If it happens to be
negative, it would be correct to say that it is "the precise description of what might happen
to the detriment of the project." Therefore, answer option a., "Detriment and benefit," is
the correct answer.

8.

Answer option b. This question requires that you calculate the Expected Monetary Value
(EMV), which is: EMV = Probability x Impact. Multiply 120, the number of risks that have
been identified, by "average impact of $8,000" per risk. The answer is $960,000, which
you would then multiply by 2% (0.02), the average probability of the risks occurring, which
would then result in answer option b., $19,200. In other words, EMV = 0.02 (Probability) x
$960,000 (Impact) = $19,200.

PMP Exam Complete Training Course Material-Master of Project Academy

Not for distribution, sale or reproduction. Cannot be used without permission of the Author.
2

9.

Answer option c. Option a., "Deciding on the required amount of management reserve,"
is primarily a function rightfully owned by senior management, not a process in which the
Project Manager would typically be involved. Option b., "Deciding on the required amount
of contingency reserve," is contingency planning - that is, determining how much reserve
will be sufficient. Option c., "Seeing if the remaining reserves are sufficient for project
completion," is a good description of Reserve Analysis.

10.

Answer option c. External risks generally display two characteristics: they originate
outside of the Project Manager's organization; and the Project Manager has little or no
control over them. Inflation is one such external risk. In contrast, poor staff assignments,
incorrect cost estimates, and contract type are internal matters over which the Project
Manager may have considerable control.

PMP Exam Complete Training Course Material-Master of Project Academy

Not for distribution, sale or reproduction. Cannot be used without permission of the Author.
3