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Questions and Answers
What is the definition of Risk in project management?
What is the definition of Risk in project management?
What is positive risk classified as?
What is positive risk classified as?
Opportunity
What type of risk always has a negative effect on the project?
What type of risk always has a negative effect on the project?
Pure Risk
Risk appetite is the specific point at which an action is required to address the risk.
Risk appetite is the specific point at which an action is required to address the risk.
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Which of the following is a technique used for risk identification in construction projects?
Which of the following is a technique used for risk identification in construction projects?
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What does risk tolerance refer to?
What does risk tolerance refer to?
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A risk trigger is an indicator that a risk is about to occur or has occurred, and they are discovered during the __________ process.
A risk trigger is an indicator that a risk is about to occur or has occurred, and they are discovered during the __________ process.
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Match the following types of risks with their descriptions:
Match the following types of risks with their descriptions:
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What is risk?
What is risk?
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What are the two types of project risk?
What are the two types of project risk?
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Which of the following is NOT a classification of risk?
Which of the following is NOT a classification of risk?
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What is the difference between risk appetite and risk tolerance?
What is the difference between risk appetite and risk tolerance?
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Define risk trigger.
Define risk trigger.
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SWOT stands for _____.
SWOT stands for _____.
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Brainstorming is an effective technique for identifying risks in construction projects.
Brainstorming is an effective technique for identifying risks in construction projects.
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What is the purpose of using checklists in risk identification?
What is the purpose of using checklists in risk identification?
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Study Notes
Risk Management
- Project Risk: Uncertainty with positive or negative impact on the project.
- Positive Risk = Opportunity
- Negative Risk = Threat
- Goal of Project Management: Increase positive risk probability and decrease negative risk probability.
- Project Risk Types:
- Individual Project Risk: Risks identified within the specific project.
- Examples: Inaccurate estimates, disengaged stakeholders, low-quality materials.
- Overall Project Risk: Risks affecting the project as a whole.
- Individual Project Risk: Risks identified within the specific project.
Risk Classification
- Pure Risk: Only negative effects.
- Personal Pure Risk: Affecting individuals with loss of earnings, assets, or increased expenses.
- Property Pure Risk: Property damage due to forces like fire, hurricanes, tornados, or lightning.
- Liability Pure Risk: Potential litigation due to perceived or actual injustice.
- Business Risk: Positive or negative effects on the project.
- Gain or loss resulting from business activities.
Risk Tolerance Definitions
- Risk Appetite: High-level willingness to accept risks to achieve goals.
- Organizational approach to risk in strategic planning.
- Risk Tolerance: Quantified acceptable variation within an organization.
- Often expressed financially or through operational metrics.
- Risk Threshold: Specific point requiring action to address risk.
- Tied to individual risks with triggers.
- Provides actionable management within risk tolerance boundaries.
- Risk Averse: Unwilling to accept any risk.
Risk Trigger
- Indicator of impending or occurred risk.
- Identified during risk identification and monitored during project execution.
- Triggers require implementing a risk response.
Variability Risk
- Set number of possible outcomes with unknown actual occurrence.
- Example: Number of errors during testing may be higher or lower than initially expected.
Ambiguity Risk
- Uncertainty due to lack of knowledge or understanding.
- Example: New disruptive technologies or market conditions.
Risk Identification Techniques
- Brainstorming: Open discussion to gather diverse perspectives for a wide range of potential risks.
- SWOT Analysis: Examines internal strengths and weaknesses, and external opportunities and threats.
- Checklists: Systematic review of historical data and past project experiences to avoid overlooking common risks.
- Expert Judgment: Leverage specialized knowledge and experience for valuable insights.
- Document Review: Reviewing plans, contracts, and historical data for comprehensive risk identification.
Risk Categories
- Technical Risks: Technological issues like software bugs, hardware failures, or technical challenges in project execution.
- Operational Risks: Issues with project operations, such as process inefficiencies, supply chain disruptions, or resource availability.
- Financial Risks: Financial uncertainties like budget overruns, funding shortfalls, or market condition changes.
Risk
- Risk in project management is uncertainty that might have a positive or negative outcome.
- Positive risk is an opportunity and negative risk is a threat.
- The goal of project management is to increase the probability of positive risks and decrease the probability of negative risks.
- Types of project risks:
- Individual project risk: risks identified in the project, like inaccurate estimates, disengaged stakeholders, low-quality materials.
- Overall project risk: risk of the project as a whole.
Risk Classification
- Pure risk: always has a negative effect on the project.
- Personal pure risk: can directly affect an individual, such as financial loss.
- Property pure risk: property damage caused by uncontrollable forces like fire or natural disasters.
- Liability pure risk: risk of litigation due to perceived or actual injustice.
- Business risk: can have a positive or negative effect on the project. Business risk is the event of gain or loss resulting from business activities.
Risk Terminology
- Risk appetite: the willingness to pursue or accept risk to achieve objectives.
- Risk tolerance: the acceptable variation that an organization can withstand.
- Risk threshold: the specific point at which action is required to address the risk.
- Risk Averse: not willing to accept any risk.
Risk Trigger
- A risk trigger is an indicator that a risk is about to occur or has already occurred.
- Once a risk trigger occurs, the project team must implement a risk response.
- Types of risk categories:
- Variability risk: a set number of possible outcomes, but uncertainty about which one will actually occur.
- Ambiguity risk: uncertainty arising from lack of knowledge or understanding.
Risk Identification Methods
- Brainstorming: gathers diverse perspectives from team members and stakeholders.
- SWOT Analysis: identifies internal and external factors that could impact the project, including strengths, weaknesses, opportunities, and threats.
- Checklists: provide a systematic way to avoid overlooking risks and identify those based on historical data and past experiences.
- Expert Judgment: leverages the knowledge and experience of experts to help identify potential risks.
- Document Review: utilizes existing project documents like plans, contracts, and historical data to identify risks.
Risk Categories
- Technical Risk: technology-related issues, such as software bugs, hardware failures, or technical challenges in project execution.
- Operational Risk: issues related to the project’s operational aspects, such as process inefficiencies, supply chain disruptions, or resource availability.
- Financial Risk: involve financial uncertainties, such as budget overruns, funding shortfalls, or changes in market conditions.
- Legal and Regulatory Risk: compliance with laws and regulations, such as building codes, permits, and environmental regulations.
- Political and Social Risk: political instability, social unrest, or changes in government policies that can impact the project.
- Environmental Risk: environmental impacts, such as natural disasters, pollution, and climate change.
- Security Risk: threats to the project's security, such as cyberattacks, data breaches, or physical security breaches.
- Human Resource Risk: issues related to the project team, such as staff turnover, lack of skills, or communication breakdowns.
- Procurement and Contractual Risk: issues related to the procurement of goods and services, such as contract disputes, delays in delivery, or quality issues.
- Stakeholder Risk: conflict or dissatisfaction from stakeholders, such as investors, clients, or the public.
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Description
This quiz covers the fundamentals of risk management within projects, including the classifications of risks and their impacts. It explores both positive and negative risks, aiming to enhance opportunities while mitigating threats. Understand the different types of project and pure risks essential for effective project management.
