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Questions and Answers
What is the probability of the manufacturing plant being catastrophically destroyed without loss of life or injury through a process malfunction each year?
What is the probability of the manufacturing plant being catastrophically destroyed without loss of life or injury through a process malfunction each year?
- 1%
- 0.000001% (correct)
- 0.0001%
- 0.01%
What is the severity of the risk to the plant due to the process malfunction?
What is the severity of the risk to the plant due to the process malfunction?
- $1 million
- $2,000,000,000 (correct)
- $10 million
- $100 million
What is the formula used to calculate the risk in this scenario?
What is the formula used to calculate the risk in this scenario?
- Risk = probability + severity
- Risk = probability / severity
- Risk = probability x severity (correct)
- Risk = probability - severity
What is the unit of measurement for the cost of the risk to the plant due to the process malfunction?
What is the unit of measurement for the cost of the risk to the plant due to the process malfunction?
What is the correct calculation for the annual cost of the risk to the plant due to the process malfunction?
What is the correct calculation for the annual cost of the risk to the plant due to the process malfunction?
What is the purpose of calculating the annual cost of the risk to the plant due to the process malfunction?
What is the purpose of calculating the annual cost of the risk to the plant due to the process malfunction?
What is the relationship between the probability and severity of a risk?
What is the relationship between the probability and severity of a risk?
What is the primary factor that determines the cost of the risk to the plant due to the process malfunction?
What is the primary factor that determines the cost of the risk to the plant due to the process malfunction?
What is the consequence of underestimating the annual cost of the risk to the plant due to the process malfunction?
What is the consequence of underestimating the annual cost of the risk to the plant due to the process malfunction?
What is the benefit of quantifying the annual cost of the risk to the plant due to the process malfunction?
What is the benefit of quantifying the annual cost of the risk to the plant due to the process malfunction?
What is the primary consideration in determining the annual cost of the risk to the plant due to the process malfunction?
What is the primary consideration in determining the annual cost of the risk to the plant due to the process malfunction?
What would be the annual cost of the risk to the plant if the severity of the risk was $1 billion?
What would be the annual cost of the risk to the plant if the severity of the risk was $1 billion?
What is the effect of increasing the probability of the process malfunction on the annual cost of the risk to the plant?
What is the effect of increasing the probability of the process malfunction on the annual cost of the risk to the plant?
What is the purpose of calculating the annual cost of the risk to the plant due to the process malfunction in the context of risk management?
What is the purpose of calculating the annual cost of the risk to the plant due to the process malfunction in the context of risk management?
What is a potential consequence of overestimating the annual cost of the risk to the plant due to the process malfunction?
What is a potential consequence of overestimating the annual cost of the risk to the plant due to the process malfunction?
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Study Notes
Risk Management
- A manufacturing plant costs $2 billion to build and has a 1 in a million chance each year of being catastrophically destroyed without loss of life or injury through a process malfunction.
- The annual cost of the risk to the plant due to the process malfunction can be calculated using the risk formula: Risk = Probability x Severity.
- The probability of the plant being destroyed is 0.000001 (1 in a million).
- The severity of the risk is the cost of the plant, which is $2,000,000,000.
- The annual cost of the risk is calculated by multiplying the probability and severity: 0.000001 x 2,000,000,000=2,000,000,000 = 2,000,000,000=2,000.
- The correct answer is D. $2,000.
Risk Management
- A manufacturing plant costs $2 billion to build and has a 1 in a million chance each year of being catastrophically destroyed without loss of life or injury through a process malfunction.
- The annual cost of the risk to the plant due to the process malfunction can be calculated using the risk formula: Risk = Probability x Severity.
- The probability of the plant being destroyed is 0.000001 (1 in a million).
- The severity of the risk is the cost of the plant, which is $2,000,000,000.
- The annual cost of the risk is calculated by multiplying the probability and severity: 0.000001 x 2,000,000,000=2,000,000,000 = 2,000,000,000=2,000.
- The correct answer is D. $2,000.
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