Risk Management and Contingency Planning Flashcards

Management reserve differs from contingency in that management reserve is intended to cover:

Answer: Unknown unknowns and unforeseeable events

Management reserve addresses unknown unknowns—completely unforeseen events—while contingency covers identified risks.

On a risk breakdown structure (RBS), risks are organized by:

Answer: Hierarchical categories to help identify and analyze risk sources

The RBS provides a hierarchical taxonomy of risk categories, helping teams systematically identify risks by source.

A P80 value from a probabilistic cost analysis means:

Answer: There is an 80% probability the project cost will be at or below that value

A P80 (80th percentile) cost means there is an 80% confidence the actual cost will not exceed that figure.

Which document formally authorizes the project team to use contingency funds when a risk event occurs?

Answer: Change order or contingency release approval

Contingency funds are typically released through a formal change order or management approval process, not automatically.

An estimator applies a 10% contingency to a Class 4 estimate. According to AACE classification, this is likely:

Answer: Too low; Class 4 estimates typically require 30-50% contingency

AACE RP 18R-97 indicates Class 4 estimates (concept screening) typically carry 15–50% contingency, so 10% is too low.

The 'bow-tie' risk analysis method visually connects:

Answer: Threat causes through a risk event to its consequences, with barriers on each side

A bow-tie diagram shows causes on the left, the risk event in the center, consequences on the right, with preventive and recovery controls as barriers.

When conducting a risk workshop for a large capital project, the primary goal of the facilitator is to:

Answer: Elicit diverse perspectives on potential risks and avoid groupthink

The facilitator's role is to draw out broad team input and ensure all risk perspectives are heard without bias or groupthink.