PMI-RMP Risk Appetite and Tolerance 2 — Questions and Answers
Question 1: A project team proposes a high-risk strategy with potential 40% cost savings. The organization's risk appetite is low. What should the PMI-RMP practitioner recommend?
- Proceed immediately to maximize savings
- Evaluate whether the strategy aligns with organizational risk appetite before proceeding (Correct answer)
- Ignore the risk appetite and focus on cost savings
- Transfer all risk to the vendor
Correct answer: Evaluate whether the strategy aligns with organizational risk appetite before proceeding
Risk decisions must be evaluated against the organization's defined risk appetite to ensure alignment with strategic governance.
Question 2: Which document formally records the organization's risk appetite and thresholds for a project?
- Project charter
- Risk management plan (Correct answer)
- Procurement contract
- Stakeholder engagement plan
Correct answer: Risk management plan
The risk management plan captures risk appetite, tolerance levels, and thresholds that will govern all risk decisions throughout the project.
Question 3: A utility function in risk management is used to:
- Calculate project earned value
- Model an individual or organization's attitude toward risk relative to monetary outcomes (Correct answer)
- Schedule risk response actions
- Identify stakeholders
Correct answer: Model an individual or organization's attitude toward risk relative to monetary outcomes
A utility function maps monetary outcomes to subjective value, revealing whether a stakeholder is risk-averse, risk-neutral, or risk-seeking.
Question 4: Risk thresholds help a project team by:
- Eliminating all project uncertainty
- Defining the point at which a risk requires escalation or active response (Correct answer)
- Guaranteeing project success
- Replacing qualitative analysis
Correct answer: Defining the point at which a risk requires escalation or active response
Thresholds provide clear, objective criteria that trigger action, ensuring risks are addressed before they breach acceptable limits.
Question 5: Organizational risk appetite should be reassessed when:
- The project team changes office locations
- Significant changes occur in the organization's strategic environment or objectives (Correct answer)
- A minor risk is closed
- The project schedule is updated
Correct answer: Significant changes occur in the organization's strategic environment or objectives
Major shifts in business environment, strategy, or leadership can alter organizational risk appetite and require formal reassessment.
Question 6: A project involves regulatory compliance. The organization's risk appetite for compliance risks is near-zero. This means:
- Compliance risks can be accepted without response
- Even minor compliance risks require immediate attention and robust response plans (Correct answer)
- Compliance risks are transferred automatically
- Compliance risks are excluded from the risk register
Correct answer: Even minor compliance risks require immediate attention and robust response plans
Near-zero appetite means the organization will not tolerate compliance deviations, requiring strong controls and immediate escalation for any such risk.
PMI-RMP Risk Appetite and Tolerance 2
A project team proposes a high-risk strategy with potential 40% cost savings.
The organization's risk appetite is low.
What should the PMI-RMP practitioner recommend?