PfMP Certification Portfolio Risk Management 2 — Questions and Answers
Question 1: Which document formally authorizes a portfolio risk management approach and defines roles, responsibilities, and methodologies?
- Risk Register
- Portfolio Charter
- Risk Management Plan (Correct answer)
- Risk Breakdown Structure
Correct answer: Risk Management Plan
The Risk Management Plan defines how portfolio risk management activities will be structured, including roles, responsibilities, timing, and methodologies.
Question 2: When a risk response creates a new risk, the newly created risk is known as a:
- Residual risk
- Secondary risk (Correct answer)
- Trigger risk
- Emerging risk
Correct answer: Secondary risk
A secondary risk is a risk that arises as a direct result of implementing a risk response, and it must be planned for just like primary risks.
Question 3: A portfolio manager uses a Risk Breakdown Structure (RBS). What is the main benefit of this tool?
- It calculates the expected monetary value of each risk
- It provides a hierarchical framework to categorize and organize portfolio risks (Correct answer)
- It assigns risk owners to each identified risk
- It quantifies residual risks after responses are implemented
Correct answer: It provides a hierarchical framework to categorize and organize portfolio risks
An RBS provides a hierarchical decomposition of risks by category, helping portfolio managers ensure comprehensive risk identification across all relevant areas.
Question 4: Which of the following best describes a 'risk threshold' in portfolio management?
- The total budget allocated to risk mitigation activities
- The measure of acceptable variation in outcomes above which a risk response is required (Correct answer)
- The minimum probability for a risk to be included in the risk register
- The maximum number of risks that can be active at any one time
Correct answer: The measure of acceptable variation in outcomes above which a risk response is required
A risk threshold is the level of risk exposure above which a risk response action is required, helping define when risks need active management.
Question 5: In portfolio risk management, 'risk aggregation' refers to:
- Adding up the financial costs of all identified risks
- Combining individual component risks to understand the overall portfolio-level risk exposure (Correct answer)
- Grouping similar risks into categories for easier tracking
- Assigning multiple risk owners to a single high-impact risk
Correct answer: Combining individual component risks to understand the overall portfolio-level risk exposure
Risk aggregation combines risks from individual portfolio components to provide a holistic view of the portfolio's overall risk exposure and its alignment with risk appetite.
Question 6: A portfolio manager decides to accept a risk without taking any action because the cost of response exceeds the expected impact. This is an example of which strategy?
- Active acceptance
- Passive acceptance (Correct answer)
- Risk avoidance
- Risk exploitation
Correct answer: Passive acceptance
Passive acceptance involves deciding not to act on a risk unless it occurs, typically because the response cost outweighs the potential benefit.
Question 7: Which output of the Identify Portfolio Risks process provides a comprehensive list of all identified risks, their characteristics, and potential risk owners?
- Risk Management Plan
- Risk Register (Correct answer)
- Risk Report
- Issue Log
Correct answer: Risk Register
The Risk Register is the primary output of risk identification, recording each identified risk, its description, category, potential causes, and possible risk owners.
PfMP Certification Portfolio Risk Management 2
Which document formally authorizes a portfolio risk management approach and defines roles, responsibilities, and methodologies?