CAPM Risk Management 3 — Questions and Answers
Question 1: A risk with a 30% probability and a $50,000 impact has an expected monetary value (EMV) of:
- $15,000 (Correct answer)
- $50,000
- $80,000
- $30,000
Correct answer: $15,000
EMV is calculated by multiplying probability by impact: 0.30 × $50,000 = $15,000.
Question 2: Which of the following tools is used to visually display the cumulative probability distribution of project outcomes?
- Probability and impact matrix
- S-curve (Correct answer)
- Tornado diagram
- Ishikawa diagram
Correct answer: S-curve
An S-curve displays the cumulative probability that project cost or schedule will not exceed a given value.
Question 3: The amount of risk an organization is willing to accept in pursuit of an objective is known as:
- Risk threshold
- Risk appetite (Correct answer)
- Risk tolerance
- Risk exposure
Correct answer: Risk appetite
Risk appetite is the broad-level amount of risk an organization is willing to accept while pursuing its strategic objectives.
Question 4: A project team decides to add extra time to the schedule to account for identified risks. This reserve is called:
- Management reserve
- Contingency reserve (Correct answer)
- Cost baseline
- Control account
Correct answer: Contingency reserve
Contingency reserve is budget allocated for known risks (known unknowns) and is included within the cost baseline.
Question 5: Which diagramming technique shows the relationship between a risk and its causes and effects?
- Network diagram
- Influence diagram (Correct answer)
- Pareto chart
- Run chart
Correct answer: Influence diagram
Influence diagrams graphically represent cause-and-effect relationships among variables including risks and their impacts.
Question 6: When a project team decides to proceed with a project activity knowing a risk exists but chooses not to act on it, this is called:
- Risk mitigation
- Risk avoidance
- Active acceptance
- Passive acceptance (Correct answer)
Correct answer: Passive acceptance
Passive acceptance means acknowledging a risk without proactive action, allowing the team to deal with it if it occurs.
Question 7: A tornado diagram is used in quantitative risk analysis to show:
- The sequence of risk events over time
- The sensitivity of project outcomes to individual risks (Correct answer)
- The cumulative probability of all risks
- The cost of risk response strategies
Correct answer: The sensitivity of project outcomes to individual risks
A tornado diagram ranks risks by their impact on the project objective, with the highest-impact risk at the top.
CAPM Risk Management 3
A risk with a 30% probability and a $50,000 impact has an expected monetary value (EMV) of: