FPM Week 9 - Risk Management

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Questions and Answers

What is the first step in the risk management process?

Risk response

Risk monitoring

Risk assessment

Risk identification (correct)

What is a risk in project management?

A guaranteed event that impacts the project negatively

An external factor that will always delay the project

An internal team dispute

An uncertain event that can have a positive or negative effect on project objectives (correct)

What is the purpose of a Risk Breakdown Structure (RBS)?

To define project quality standards

To categorize project risks for better management (correct)

To develop the project schedule

To monitor resource allocation

What type of risk is described as an uncertain event that can positively affect project objectives?

Opportunity Signup and view all the answers

What is the definition of a threat in project management?

A negative risk event Signup and view all the answers

Which document is used to capture all identified risks and their details?

Risk register Signup and view all the answers

What is the main difference between qualitative and quantitative risk analysis?

Qualitative prioritizes risks based on impact and likelihood, while quantitative uses numerical techniques to assess them Signup and view all the answers

Which risk response strategy is used when a risk is outside the project manager's control?

Escalate Signup and view all the answers

What is the purpose of using a probability and impact matrix?

To prioritize risks based on their probability of occurrence and potential impact Signup and view all the answers

Which risk response strategy involves transferring risk ownership to a third party?

Transfer Signup and view all the answers

What is a contingent response in project risk management?

A predefined action taken if an identified risk occurs Signup and view all the answers

Which of the following is a proactive risk response strategy for opportunities?

Exploit Signup and view all the answers

What type of contract provides the least risk to the buyer?

Fixed Price Signup and view all the answers

What is the main advantage of a Cost Plus Award Fee (CPAF) contract?

Incentives for the seller to exceed performance standards Signup and view all the answers

What is the primary purpose of the Procurement Management Plan?

To document project purchasing decisions and specify the procurement approach Signup and view all the answers

Which tool is used to evaluate seller responses and determine the best fit for the project?

Weighted scoring model Signup and view all the answers

What is a Request for Proposal (RFP) used for in procurement?

To solicit detailed proposals from potential sellers on how they will fulfill project requirements Signup and view all the answers

What is an advantage of using a fixed price contract?

The seller assumes the majority of the risk Signup and view all the answers

What is the purpose of a make-or-buy analysis?

To determine whether to outsource a project task or complete it internally Signup and view all the answers

What is a characteristic of Time and Material (T&M) contracts?

The total value of the contract depends on the quantities needed to complete the work Signup and view all the answers

What does a procurement management plan typically include?

High-level budget estimate for procurement Signup and view all the answers

Which risk response strategy involves reducing the probability or impact of a risk?

Mitigate Signup and view all the answers

What is a fallback plan?

A set of actions available if the primary risk response plan fails Signup and view all the answers

What type of risk is known as a 'positive risk event'?

Opportunity Signup and view all the answers

What is the purpose of a bidder conference?

To ensure all potential sellers have a clear understanding of the requirements Signup and view all the answers

What does 'risk appetite' refer to in a project?

The organization's tolerance for risk exposure Signup and view all the answers

Which risk response is appropriate when the project manager decides to leave the risk impact as is?

Accept Signup and view all the answers

What type of analysis is performed to group risks by their causes?

Root cause identification Signup and view all the answers

What is the primary purpose of a risk register?

To track the probability and impact of risks throughout the project Signup and view all the answers

What is the best procurement strategy for a project where the buyer wants to transfer risk to the seller?

Fixed Price Signup and view all the answers

Which procurement document provides detailed specifications for items to be purchased?

RFQ (Request for Quote) Signup and view all the answers

Which contract type is most suitable for a project where costs are unpredictable?

Time and Materials (T&M) Signup and view all the answers

In risk management, what is the role of monitoring risks?

To track risk events and ensure response plans are executed as needed Signup and view all the answers

What is the purpose of risk thresholds in a project?

To establish the level of risk that the organization is willing to accept Signup and view all the answers

What type of analysis is used to calculate the probability and impact of a risk?

Quantitative risk analysis Signup and view all the answers

What type of contract includes incentives for meeting specific objectives?

Fixed Price Incentive Fee (FPIF) Signup and view all the answers

Which risk response involves sharing ownership of the risk with another party?

Share Signup and view all the answers

What is a primary disadvantage of a Cost Plus Percentage Fee (CPPF) contract?

It encourages increased costs without incentive for efficiency Signup and view all the answers

What is a procurement audit used for?

To identify lessons learned in the procurement process Signup and view all the answers

Which type of procurement involves buying an off-the-shelf item?

Commercial procurement Signup and view all the answers

What is the purpose of a 'risk burndown chart'?

To track the reduction of overall project risk exposure over time Signup and view all the answers

What is a common method for deciding between make-or-buy?

Cost-benefit analysis Signup and view all the answers

In what scenario would a Cost Plus Incentive Fee (CPIF) be ideal?

When the seller must be motivated to control costs Signup and view all the answers

Which of the following is an example of a 'risk trigger'?

A weather alert indicating that a storm is approaching Signup and view all the answers

What procurement method allows sellers to propose various solutions?

RFP (Request for Proposal) Signup and view all the answers

What does a fallback plan ensure?

Secondary actions if the primary risk response fails Signup and view all the answers

What type of contract is best when the buyer wants to ensure a predictable cost?

Firm Fixed Price Signup and view all the answers

What is the definition of a residual risk?

A risk that remains after a risk response is implemented Signup and view all the answers

What type of contract would most likely be used for government contracts involving unknown quantities?

Time and Materials Signup and view all the answers

What is the primary purpose of claims administration in procurement?

To manage contested charges and unresolved issues Signup and view all the answers

Study Notes

Risk Management Process

First step is risk identification, crucial for recognizing potential issues.
A risk in project management refers to uncertain events affecting project objectives, either positively or negatively.

Risk Breakdown Structure (RBS)

RBS categorizes project risks to enable efficient management and prioritization.

Types of Risks

Positive risk events are termed opportunities, presenting a chance for project improvement.
Threats are classified as negative risk events that could hinder project success.

Documentation and Analysis

Risk register captures all identified risks with their details, serving as a comprehensive record.
Qualitative risk analysis prioritizes risks based on impact and likelihood, while quantitative risk analysis employs numerical techniques for assessment.

Risk Response Strategies

Escalation is used for risks beyond the project manager's control, while transfer involves shifting risk ownership to a third party.
Contingent response plans are predefined actions triggered if a risk materializes.
Exploit is a proactive strategy for opportunities, aimed at maximizing positive impacts.

Contractual Considerations

Fixed Price contracts place the least risk on the buyer, ensuring cost predictability.
Cost Plus Award Fee contracts incentivize sellers to exceed performance standards, benefiting project outcomes.
Time and Materials contracts depend on the amount of work completed, suitable for unpredictable costs.

Assessing Risks

Probability and impact matrices categorize risks, helping in prioritization based on occurrence likelihood and potential impact.
Fallback plans outline actions when primary risk responses fail, ensuring preparedness.

Procurement Processes

The Procurement Management Plan documents purchasing decisions and strategies for procurement.
Requests for Proposals (RFPs) solicit detailed offers from vendors for fulfilling project requirements.
Make-or-buy analysis resolves whether tasks should be outsourced or completed internally.

Risk Appetite and Thresholds

Risk appetite defines an organization’s tolerance for risk exposure, influencing project decisions.
Risk thresholds establish the level of risk acceptable to the organization, guiding response strategies.

Claims Administration

Claims administration focuses on managing contested charges and unresolved issues between buyers and sellers, crucial for maintaining project integrity.

Conclusion

Effective risk management and procurement strategies are vital for project success, enabling teams to minimize potential negative impacts while maximizing opportunities.

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Description

Test your knowledge on the fundamentals of risk management. This quiz covers essential concepts such as risk identification, assessment, and response. Perfect for project managers and those studying project management processes.