PCC Risk Assessment & Mitigation 2 — Questions and Answers
Question 1: Which risk response strategy involves shifting the negative impact of a risk to a third party?
- Avoid
- Transfer (Correct answer)
- Mitigate
- Accept
Correct answer: Transfer
Risk transfer moves the financial or operational consequence to another party, such as through insurance or fixed-price contracts.
Question 2: A project team identifies a risk with a 40% probability and a $500,000 impact. What is the risk's Expected Monetary Value (EMV)?
- $200,000 (Correct answer)
- $500,000
- $125,000
- $300,000
Correct answer: $200,000
EMV is calculated by multiplying probability (0.40) by impact ($500,000), yielding $200,000.
Question 3: What is the primary purpose of a risk register in project controls?
- Track budget allocations
- Document identified risks and response plans (Correct answer)
- Schedule resource assignments
- Record change orders
Correct answer: Document identified risks and response plans
A risk register is the central repository for all identified risks, their assessments, owners, and planned responses.
Question 4: In a tornado diagram, what does the length of each bar represent?
- The probability of a risk occurring
- The range of impact a variable has on the project outcome (Correct answer)
- The cost of the risk response
- The number of stakeholders affected
Correct 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.
Question 5: Which type of risk cannot be eliminated through diversification because it affects the entire market or industry?
- Residual risk
- Secondary risk
- Systematic risk (Correct answer)
- Inherent risk
Correct answer: Systematic risk
Systematic risk (also called non-diversifiable risk) arises from macroeconomic factors and affects all projects in a market.
Question 6: What is a 'residual risk' in the context of project risk management?
- A new risk created by a response action
- The risk remaining after mitigation measures are applied (Correct answer)
- An unidentified risk that materializes late
- A risk transferred to a subcontractor
Correct 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.
Question 7: During a quantitative risk analysis, which technique uses statistical sampling to model the probability of different outcomes?
- SWOT Analysis
- Monte Carlo Simulation (Correct answer)
- Delphi Technique
- Risk Breakdown Structure
Correct answer: Monte Carlo Simulation
Monte Carlo Simulation runs thousands of iterations using probability distributions to forecast a range of possible project outcomes.
PCC Risk Assessment & Mitigation 2
Which risk response strategy involves shifting the negative impact of a risk to a third party?