Bootstrap Risk Assessment & Management 3 — Questions and Answers
Question 1: When a project team decides to eliminate a risk by changing the project plan to remove the threatening condition, this is called:
- Risk mitigation
- Risk avoidance (Correct answer)
- Risk acceptance
- Risk transfer
Correct answer: Risk avoidance
Risk avoidance involves altering the project plan to eliminate the risk entirely, such as changing scope, schedule, or technology.
Question 2: A contingency reserve differs from a management reserve in that contingency reserves are intended for:
- Unknown-unknown risks
- Known risks with defined response plans (Correct answer)
- Executive-level decisions only
- Post-project audits
Correct answer: Known risks with defined response plans
Contingency reserves address known risks documented in the risk register, while management reserves handle unforeseen unknown-unknown risks.
Question 3: Which quantitative risk analysis technique simulates thousands of possible project outcomes using random variable sampling?
- Delphi technique
- SWOT analysis
- Monte Carlo simulation (Correct answer)
- Fault tree analysis
Correct answer: Monte Carlo simulation
Monte Carlo simulation runs iterative random sampling of risk variables to produce a probability distribution of possible outcomes.
Question 4: A 'secondary risk' is best described as:
- A risk with low probability and low impact
- A new risk created as a direct result of implementing a risk response (Correct answer)
- A risk passed to a subcontractor
- A risk that occurs after project close-out
Correct answer: A new risk created as a direct result of implementing a risk response
Secondary risks arise from implementing a chosen risk response — solving one problem can inadvertently create another.
Question 5: In decision tree analysis, what does the Expected Monetary Value at each chance node represent?
- The worst-case cost of that branch
- The weighted average outcome based on branch probabilities (Correct answer)
- The sunk cost already spent
- The budget allocated to that decision path
Correct answer: The weighted average outcome based on branch probabilities
At a chance node, EMV is calculated by multiplying each possible outcome's value by its probability and summing them to find the weighted average.
Question 6: Which risk identification technique involves structured brainstorming with anonymous input to eliminate group think?
- Nominal group technique
- Interviews
- Delphi technique (Correct answer)
- Checklist analysis
Correct answer: Delphi technique
The Delphi technique uses multiple anonymous rounds of expert input and feedback cycles to reach consensus without dominant personalities influencing results.
Question 7: A project risk with high probability but very low impact would typically be treated with which strategy?
- Avoid — eliminate it immediately
- Transfer — insure against it
- Accept — monitor passively (Correct answer)
- Escalate — involve senior management
Correct answer: Accept — monitor passively
Low-impact risks generally don't justify the cost of active mitigation or transfer; passive acceptance with monitoring is sufficient.
Bootstrap Risk Assessment & Management 3
When a project team decides to eliminate a risk by changing the project plan to remove the threatening condition, this is called: