Pre-Test
Project Risk and Cost Analysis
Course Code 98008
INSTRUCTIONS: Record your answers on one of the scannable forms enclosed. Please follow the directions on the form carefully. Be sure to keep a copy of the completed answer form for your records. No photocopies will be graded. When completed, mail your answer form to:
Educational Services
American Management Association
P.O. Box 133
Florida, NY 10921
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1. Qualitative risk analysis is defined as:
(a) numerically analyzing the effect of identified risks on overall project objectives.
(b) measuring the accuracy and quality of risk data in objective terms.
(c) identifying risks that may affect your project.
(d) prioritizing risks for further analysis by assessing and combining their probability and impact.
2. If the cost of insurance for a particular risk is greater than the value of the underlying risk, the difference between the two numbers is known as:
(a) risk premium.
(b) contingency reserve.
(c) degree to which the policy is overpriced.
(d) price-to-book ratio.
3. One category of threat risk response is:
(a) mitigation.
(b) exploitation.
(c) sharing.
(d) enhancement.
4. If there is a 20% probability of an event that would cost the project $20,000, what is the value of the risk?
(a) $20,000
(b) $4,000
(c) $24,000
(d) $2,000
5. To run a Monte Carlo simulation program, you must first:
(a) prepare three-point estimates for task durations.
(b) perform decision tree analysis of make vs. buy options.
(c) calculate the root sum square of the schedule standard deviation for tasks on the critical path.
(d) perform a full PERT analysis of the schedule network.
6. In developing risk responses for opportunities, you may consider:
(a) avoidance.
(b) mitigation.
(c) transfer.
(d) sharing.
7. What does a project network diagram do?
(a) Displays a project schedule graphically
(b) Shows a project schedule as a bar graph over time
(c) Connects project resources with project activities
(d) Establishes the communication plan for the project
8. How does negative brainstorming differ from conventional brainstorming?
(a) Negative brainstorming is the result of failure of a conventional brainstorming.
(b) Negative brainstorming allows criticism and evaluation of ideas during the process.
(c) Negative brainstorming looks at the potential problems with conventional brainstormed answers.
(d) Negative brainstorming involves brainstorming a negative question to identify downside risks.
9. What is a characteristic of a black swan event?
(a) Hard to predict and rare
(b) Something that cannot possibly occur
(c) Conforms to project assumptions
(d) Has a relatively small impact
10. To compare costs and benefits, you must:
(a) describe all costs and benefits in deterministic form.
(b) perform expected monetary value analysis on costs and benefits impacting 10% or more of total project value (TPV).
(c) perform a PERT analysis of the project network to determine schedule risk.
(d) quantify all aspects of the project in the same unit of measurement and at the same point in time.
11. In the PMBOK® model, which of the following processes involves studying risks to understand their nature, probability, and impact?
(a) Risk response planning
(b) Risk identification
(c) Risk monitoring and control
(d) Risk analysis
12. What does a decision tree analysis do?
(a) Filters risks during qualitative risk analysis
(b) Shows causes and effects of risks in a “fishbone” diagram
(c) Calculates total risk exposure on a project
(d) Compares expected monetary values (EMV) of different alternatives, choices, or conditions
13. What is the probability that you will not roll a 4 or a 6 on a six-sided die?
(a) 2/6
(b) 2/12
(c) 4/24
(d) 4/6
14. The confidence level for a project measures:
(a) how much we know about project risks.
(b) how good the project manager’s track record has been.
(c) how stable the customer’s requirements will be.
(d) how likely the project will finish on or before a given date.
15. What technique should you use to perform risk triage of your identified risks?
(a) Cause-and-effect diagramming
(b) Filtering
(c) PERT analysis
(d) Risk response planning
16. Which measure of central tendency describes the average of a group of numbers?
(a) Median
(b) Mode
(c) Mean
(d) Medium
17. When you write a risk as an “if–then” statement, what are the two parts called?
(a) Business risk and pure risk
(b) Condition and consequence
(c) Probability and impact
(d) Problem and solution
18. Which of the following words is one of the named categories in a SWOT analysis?
(a) Supervision
(b) Wildly-Aimed Guess
(c) Other Factors
(d) Threat
19. Convergence risk is the risk that:
(a) a task will take longer than scheduled.
(b) a sequence of dependent tasks will take longer than scheduled.
(c) critical tasks will take longer than scheduled.
(d) at least one predecessor of a task with multiple predecessors will take longer than scheduled.
20. What does a risk matrix do?
(a) Combines word descriptions of probability and impact into a grid
(b) Applies a numerical scale to risk probability and impact
(c) Classifies risks when probability and impact are known and definite
(d) Supports Boolean analysis of risk data
21. In qualitative risk analysis, what can you do with the risks you identify?
(a) Avoid, transfer, or accept them
(b) Exploit, enhance, or share them
(c) Accept them or prepare a contingent response
(d) Accept, transfer, or do something about the risk
22. A risk management plan should be prepared:
(a) only after important project milestones have been missed.
(b) as an integral part of any well-prepared project management plan.
(c) as part of a postmortem project review.
(d) after serious organizational consequences have been incurred.
23. One strategy for approaching risks that are very low in probability but potentially catastrophic in outcome is:
(a) decision-tree analysis.
(b) cost-benefit analysis.
(c) Monte Carlo simulation.
(d) multi-stage solution.
24. Business risk differs from pure risk in what way?
(a) Business risk is about the potential for loss.
(b) To manage a business risk, you can purchase insurance.
(c) Business risk combines the possibility of positive and negative outcomes in the same decision or event.
(d) Business risk is upside risk.
25. In risk management, a cause-and effect diagram allows you to:
(a) find better solutions to specific risks.
(b) find the critical path in a project network diagram.
(c) brainstorm root causes of risk in a structured fashion.