Risk Management Flashcards
7 cards from real Financial Management for Project Managers practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 Risk Management flashcards as text
A project manager calculates the Expected Monetary Value (EMV) of a risk event with a 30% probability and a $50,000 impact. What is the EMV?
Answer: $15,000
EMV = Probability × Impact = 0.30 × $50,000 = $15,000.
Which risk response strategy involves shifting the financial impact of a risk to a third party, such as through insurance?
Answer: Transfer
Transferring a risk moves the financial consequence to another party (e.g., insurer or contractor) without eliminating the risk itself.
A Monte Carlo simulation is used in project financial risk management primarily to:
Answer: Model the probability distribution of possible project cost outcomes
Monte Carlo simulation runs thousands of iterations to produce a probability distribution of possible cost or schedule outcomes.
When a project team decides to add redundant systems to reduce the likelihood of a technical failure, this is an example of:
Answer: Risk mitigation
Adding redundancy reduces the probability or impact of a risk, which is the definition of risk mitigation.
A project has a risk reserve of $80,000. After using $30,000 for realized risks, what percentage of the original reserve remains?
Answer: 62.5%
Remaining reserve = $50,000; $50,000 ÷ $80,000 = 62.5%.
In a risk register, the 'risk owner' field is used to document:
Answer: The individual responsible for monitoring and responding to the risk
The risk owner is the person accountable for monitoring the risk and executing the agreed response plan.
Which of the following best describes a 'secondary risk' in project financial management?
Answer: A new risk created as a direct result of implementing a risk response
Secondary risks emerge as a consequence of the actions taken to address an original risk.