Risk Assessment & Mitigation Flashcards

Which risk response strategy involves shifting the negative impact of a risk to a third party?

Answer: Transfer

Risk transfer moves the financial or operational consequence to another party, such as through insurance or fixed-price contracts.

A project team identifies a risk with a 40% probability and a $500,000 impact. What is the risk's Expected Monetary Value (EMV)?

Answer: $200,000

EMV is calculated by multiplying probability (0.40) by impact ($500,000), yielding $200,000.

What is the primary purpose of a risk register in project controls?

Answer: Document identified risks and response plans

A risk register is the central repository for all identified risks, their assessments, owners, and planned responses.

In a tornado diagram, what does the length of each bar represent?

Answer: The range of impact a variable has on the project outcome

Each bar in a tornado diagram shows the swing — the difference between the high and low outcomes — for each risk variable.

Which type of risk cannot be eliminated through diversification because it affects the entire market or industry?

Answer: Systematic risk

Systematic risk (also called non-diversifiable risk) arises from macroeconomic factors and affects all projects in a market.

What is a 'residual risk' in the context of project risk management?

Answer: The risk remaining after mitigation measures are applied

Residual risk is the level of risk that persists after all planned risk responses have been implemented.

During a quantitative risk analysis, which technique uses statistical sampling to model the probability of different outcomes?

Answer: Monte Carlo Simulation

Monte Carlo Simulation runs thousands of iterations using probability distributions to forecast a range of possible project outcomes.