Risk Management Flashcards

In risk management, how is 'risk' commonly defined?

Answer: The product of the probability of an event and its potential impact

Risk is typically quantified as the combination of the likelihood (probability) of an uncertain event occurring and its consequence (impact) if it does occur.

What is the difference between a 'risk' and an 'issue' in project management?

Answer: A risk is a potential future event; an issue is a problem that has already occurred

A risk is an uncertain future event that may affect project objectives, while an issue is a risk that has materialized and requires immediate resolution.

Which risk response strategy involves transferring the financial consequence of a risk to a third party?

Answer: Risk transfer

Risk transfer shifts the financial consequences of a risk to another party, typically through insurance, warranties, or contractual provisions like indemnification clauses.

In a risk matrix, a risk rated as 'high probability' and 'high impact' falls into which category?

Answer: High priority risk requiring immediate attention

High-probability, high-impact risks sit in the upper-right quadrant of a risk matrix and require immediate, active mitigation or response planning.

What is a 'risk register' in engineering project management?

Answer: A document that identifies, analyzes, and records responses to project risks

A risk register is a centralized document that captures identified risks, their probability, impact, ownership, and planned response strategies throughout the project.

What does 'risk appetite' refer to in organizational risk management?

Answer: The level of risk an organization is willing to accept in pursuit of its objectives

Risk appetite defines the broad level of risk an organization is willing to accept to achieve its strategic goals, guiding decision-making across the enterprise.