Financial Management for Project Managers Risk Management 4

Question 1

A project's cost estimate has a P80 value of $2.4M and a P50 value of $2.1M. A risk-averse sponsor prefers to fund the project at which level?

Accepted Answer

P80 ($2.4M)

Answer

Funding at P80 means there is an 80% probability that actual costs will not exceed that amount, providing a larger buffer for a risk-averse sponsor.

Question 2

Which of the following is an example of a 'residual risk'?

Accepted Answer

The remaining exposure after a risk response has been implemented

Answer

Residual risk is the level of exposure that remains after a risk response has been applied.

Question 3

A project manager notices that actual cost variance is consistently negative across multiple reporting periods. From a risk management perspective, this MOST likely indicates:

Accepted Answer

An unidentified risk has materialized and is affecting costs

Answer

Persistent negative cost variance (spending more than planned) often signals that an unplanned risk event is impacting the project.

Question 4

When using a probability and impact matrix, a risk rated 'High' probability and 'High' impact would typically require which response approach?

Accepted Answer

Aggressive response planning (avoid, transfer, or mitigate)

Answer

High/High risks represent the greatest threat to project objectives and demand proactive, aggressive response strategies.

Question 5

A project manager calculates that fixing a defect after delivery will cost $500,000 but preventing it during development costs $50,000. This analysis is BEST described as:

Accepted Answer

Cost-benefit analysis of risk response options

Answer

Comparing the cost of prevention versus the cost of failure is a cost-benefit analysis used to justify proactive risk responses.

Financial Management for Project Managers Practice Test

Financial Management for Project Managers Practice Test

Financial Management for Project Managers Risk Management 4