OM Risk Assessment & Mitigation 3 — Questions and Answers
Question 1: What is the primary purpose of a risk breakdown structure (RBS)?
- To document the cost of each identified risk
- To hierarchically categorize risks by source or type for systematic identification (Correct answer)
- To assign ownership of risks across the organization chart
- To schedule risk response activities in the project timeline
Correct answer: To hierarchically categorize risks by source or type for systematic identification
An RBS organizes risks into a hierarchical structure by category or source, helping teams systematically identify and analyze risks.
Question 2: Sensitivity analysis in quantitative risk analysis is used to:
- Rank which individual risks have the greatest potential impact on project outcomes (Correct answer)
- Identify which stakeholders are most sensitive to project delays
- Calculate the probability of completing a project within budget
- Determine the optimal risk appetite for an organization
Correct answer: Rank which individual risks have the greatest potential impact on project outcomes
Sensitivity analysis (often displayed as a tornado diagram) shows which individual risks, if they occur, have the greatest effect on the project objective.
Question 3: An organization continuously monitors its risk environment and updates its risk register on a rolling basis. This practice is known as:
- Risk auditing
- Risk reassessment
- Continuous risk monitoring (Correct answer)
- Iterative risk identification
Correct answer: Continuous risk monitoring
Continuous risk monitoring is the ongoing process of tracking identified risks, identifying new ones, and updating the risk register throughout a project or operation.
Question 4: Which risk response strategy is most appropriate when a risk event would have a positive impact (opportunity)?
- Avoid
- Exploit (Correct answer)
- Transfer
- Accept
Correct answer: Exploit
Exploiting an opportunity means taking deliberate action to ensure the positive risk event occurs and the benefit is realized.
Question 5: A contingency reserve is best described as:
- Funds set aside by senior management for unanticipated project scope changes
- Budget allocated to address known risks that may require action (Correct answer)
- Emergency budget with no spending authorization required
- Savings carried forward from previous project phases
Correct answer: Budget allocated to address known risks that may require action
Contingency reserves are planned budget or time buffers allocated specifically to address identified risks that appear in the risk register.
Question 6: Which of the following best defines 'inherent risk'?
- Risk that is unique to a specific industry sector
- The level of risk existing before any controls or mitigations are applied (Correct answer)
- Risk that cannot be transferred or insured against
- Residual risk after all responses have been implemented
Correct answer: The level of risk existing before any controls or mitigations are applied
Inherent risk is the raw or gross risk level assessed without considering any existing controls, policies, or mitigation measures.
Question 7: During risk planning, an organization decides to redesign a process to completely eliminate exposure to a specific risk. This is an example of:
- Risk mitigation
- Risk avoidance (Correct answer)
- Risk transfer
- Risk acceptance
Correct answer: Risk avoidance
Risk avoidance eliminates the threat entirely by changing the plan or approach so the risk can no longer occur.
OM Risk Assessment & Mitigation 3
What is the primary purpose of a risk breakdown structure (RBS)?