Full Practice Test Flashcards

A Monte Carlo simulation is most commonly used during which risk management process?

Answer: Perform Quantitative Risk Analysis

Monte Carlo simulation is a quantitative technique used to model the combined effect of risks numerically.

What does a tornado diagram primarily display in sensitivity analysis?

Answer: The relative influence of individual variables on the outcome

A tornado diagram ranks variables by how much each influences the project outcome, showing the most impactful first.

Expected monetary value (EMV) of a risk is calculated by multiplying which two factors?

Answer: Probability and monetary impact

EMV equals the probability of a risk occurring multiplied by its monetary impact.

In a decision tree analysis, a node represented by a square typically indicates what?

Answer: A decision point

In decision trees, square nodes represent decisions while circular nodes represent chance events.

A risk has an EMV of -$10,000. A proposed response costs $3,000 and is expected to eliminate the risk entirely. What is the net benefit of the response?

Answer: $7,000

Avoiding a -$10,000 expected loss for a $3,000 cost yields a net benefit of $7,000.

What does the P80 value from a quantitative cost risk analysis represent?

Answer: The cost with an 80% chance of not being exceeded

P80 is the cost level that there is an 80% probability the actual cost will be at or below.

Quantitative risk analysis is most justified on which type of project?

Answer: Large or complex projects where overall risk exposure must be quantified

Quantitative analysis adds the most value on large or complex projects where numeric risk exposure informs decisions and reserves.