Project Risk Management Risk Response Strategies 2 — Questions and Answers
Question 1: A project team decides to purchase insurance to cover potential losses from a major equipment failure. Which risk response strategy does this represent?
- Avoid
- Transfer (Correct answer)
- Mitigate
- Accept
Correct answer: Transfer
Purchasing insurance transfers the financial impact of a risk to a third party (the insurer).
Question 2: Which of the following is the BEST example of a risk avoidance strategy?
- Adding a contingency reserve to the budget
- Eliminating a high-risk project phase from the scope (Correct answer)
- Outsourcing risky activities to a vendor
- Documenting the risk in the risk register
Correct answer: Eliminating a high-risk project phase from the scope
Avoidance eliminates the risk entirely, often by changing the project plan or removing the source of the risk.
Question 3: A risk response plan requires significant upfront investment but substantially reduces the probability of a critical risk. What should the project manager evaluate to justify this response?
- The risk's proximity on the schedule
- Whether the cost of the response is less than the expected monetary value of the risk (Correct answer)
- The number of stakeholders affected by the risk
- The risk owner's availability
Correct answer: Whether the cost of the response is less than the expected monetary value of the risk
A response is justified when its cost is less than the expected monetary value (probability × impact) of the risk it addresses.
Question 4: Passive acceptance of a risk means the project team will:
- Monitor the risk and implement a contingency plan if it occurs
- Take no action and deal with consequences if the risk occurs (Correct answer)
- Reduce the probability of the risk occurring
- Transfer the risk to a third party
Correct answer: Take no action and deal with consequences if the risk occurs
Passive acceptance involves no proactive action; the team simply deals with the risk if and when it materializes.
Question 5: A software project team identifies that a critical dependency on a vendor could delay the project. They negotiate a contractual penalty clause for late delivery. This is an example of:
- Exploit
- Transfer (Correct answer)
- Mitigate
- Enhance
Correct answer: Transfer
Shifting the financial consequence of the vendor's delay to the vendor via a penalty clause is a risk transfer strategy.
Question 6: Which risk response strategy is most appropriate for a threat that has very low probability and very low impact?
- Avoid
- Transfer
- Mitigate
- Accept (Correct answer)
Correct answer: Accept
Low-probability, low-impact threats are typically accepted because the cost of a response would exceed the expected loss.
Question 7: A risk response owner is assigned in the risk register. What is this person primarily responsible for?
- Approving the project budget contingency
- Implementing and monitoring the agreed risk response plan (Correct answer)
- Identifying new risks throughout the project
- Reporting risk status to the project sponsor
Correct answer: Implementing and monitoring the agreed risk response plan
The risk response owner is accountable for executing and monitoring the specific risk response strategy assigned to them.
Project Risk Management Risk Response Strategies 2
A project team decides to purchase insurance to cover potential losses from a major equipment failure.
Which risk response strategy does this represent?