CPE Risk Management and Contingency Planning 2

Question 1

Which risk response strategy involves shifting the financial impact of a risk to a third party, such as through insurance?

Accepted Answer

Transfer

Answer

Risk transfer moves the financial consequence to another party, commonly via insurance or contractual clauses.

Question 2

In Monte Carlo simulation for cost estimating, what does the output probability distribution represent?

Accepted Answer

The range of possible total project costs with associated probabilities

Answer

Monte Carlo simulation produces a probability distribution showing the likelihood of various total cost outcomes.

Question 3

A CPE identifies that steel price volatility could increase project costs by 12%. This is best classified as which type of risk?

Accepted Answer

Market/escalation risk

Answer

Commodity price fluctuations like steel pricing fall under market or escalation risk categories.

Question 4

What is the primary purpose of a risk register in project estimating?

Accepted Answer

To document identified risks, their probability, impact, and planned responses

Answer

A risk register is the central document cataloging all identified risks along with assessment and response data.

Question 5

When using the expected value (EV) method, a risk has a 25% probability of occurring and a $200,000 cost impact. What is the expected monetary value?

Accepted Answer

$50,000

Answer

Expected monetary value = probability × impact = 0.25 × $200,000 = $50,000.

(CPE) Certified Professional Estimator Practice Test