OM Risk Assessment & Mitigation 2 — Questions and Answers
Question 1: Which risk assessment technique uses a numerical scale to rate both the likelihood and impact of a risk, then multiplies the two values to produce a risk score?
- Risk breakdown structure
- Probability-impact matrix (Correct answer)
- Monte Carlo simulation
- SWOT analysis
Correct answer: Probability-impact matrix
A probability-impact matrix rates likelihood and impact on numerical scales and multiplies them to calculate a composite risk score for prioritization.
Question 2: An organization's risk appetite is best described as:
- The maximum loss the organization can sustain before bankruptcy
- The amount of risk an organization is willing to accept in pursuit of its objectives (Correct answer)
- The residual risk remaining after controls are applied
- The total cost of all identified risks in a project
Correct answer: The amount of risk an organization is willing to accept in pursuit of its objectives
Risk appetite defines the level of risk an organization is willing to tolerate while pursuing its strategic goals.
Question 3: What is 'residual risk' in risk management?
- Risk that has already materialized and caused damage
- Risk that remains after controls and mitigation measures have been applied (Correct answer)
- Risk transferred to a third-party vendor
- The initial risk score before any analysis is performed
Correct answer: Risk that remains after controls and mitigation measures have been applied
Residual risk is the risk exposure that remains after all planned risk responses and controls have been implemented.
Question 4: A project manager identifies a risk that could delay the project by two weeks but decides not to implement any response because the cost of mitigation exceeds the expected impact. This strategy is called:
- Risk avoidance
- Risk transfer
- Risk acceptance (Correct answer)
- Risk exploitation
Correct answer: Risk acceptance
Risk acceptance is chosen when the cost or effort to mitigate a risk outweighs its potential impact, so no action is taken.
Question 5: The Delphi technique is used in risk identification primarily to:
- Automate risk scoring using historical data
- Reach consensus among experts through anonymous iterative questionnaires (Correct answer)
- Map risks to specific project phases on a timeline
- Transfer risk to insurance providers
Correct answer: Reach consensus among experts through anonymous iterative questionnaires
The Delphi technique gathers expert input anonymously across multiple rounds to build consensus on risks without social pressure or groupthink.
Question 6: In a risk register, which field distinguishes a 'risk owner' from a 'risk reporter'?
- The risk owner documents the risk while the reporter responds to it
- The risk owner is accountable for monitoring and responding to the risk; the reporter identifies and logs it (Correct answer)
- The risk owner sets the budget for mitigation; the reporter tracks costs
- The risk owner approves the risk register; the reporter audits it
Correct answer: The risk owner is accountable for monitoring and responding to the risk; the reporter identifies and logs it
A risk owner is assigned accountability for managing and responding to a specific risk, while the reporter is the person who originally surfaced it.
Question 7: Which of the following is an example of risk transfer?
- Canceling a risky project phase entirely
- Purchasing insurance to cover potential losses (Correct answer)
- Assigning extra resources to finish work faster
- Adding buffer time to the project schedule
Correct answer: Purchasing insurance to cover potential losses
Purchasing insurance shifts the financial consequence of a risk to a third party (the insurer), which is the classic example of risk transfer.
OM Risk Assessment & Mitigation 2
Which risk assessment technique uses a numerical scale to rate both the likelihood and impact of a risk, then multiplies the two values to produce a risk score?