Risk Assessment & Mitigation Flashcards

An owner directs the contractor to include a 10% cost contingency in the bid for potential geotechnical surprises. This is an example of which risk response strategy?

Answer: Accept — active

Active acceptance involves deliberately planning for a risk by allocating contingency reserves rather than changing the plan to avoid it.

Which tool is used to trace a risk back to its fundamental cause to prevent recurrence?

Answer: Root Cause Analysis

Root Cause Analysis (RCA) identifies the underlying cause of a risk event so that corrective actions address the source, not just the symptom.

In earned value management, a Cost Variance (CV) of negative $150,000 most directly indicates:

Answer: The project is over budget by $150,000 at the current performance point

CV = EV − AC; a negative CV means the project has spent more than the earned value of the work completed, indicating cost overrun.

A project team performs a risk reassessment at the end of each phase. This practice is aligned with which principle?

Answer: Continuous risk monitoring and iterative risk management

Risk management is an iterative process; risks must be re-evaluated as the project evolves, new information emerges, and conditions change.

Which contract type places the greatest financial risk on the owner (client) for cost growth?

Answer: Cost Plus Fixed Fee (CPFF)

Under Cost Plus Fixed Fee contracts, the owner reimburses all allowable costs, absorbing cost growth risk while the contractor earns a fixed fee.

What is the purpose of a risk audit in a project controls context?

Answer: To evaluate the effectiveness of risk responses and the risk management process

Risk audits examine whether risk responses are being implemented as planned and assess how well the overall risk management process is working.

A project controls specialist notices that the project's Estimate at Completion (EAC) is consistently higher than the Budget at Completion (BAC). This situation most likely signals:

Answer: The project has a cost overrun risk and may exceed its authorized budget

When EAC > BAC, the projected final cost exceeds the approved budget, indicating a cost overrun risk that requires corrective action or re-baselining.