Project Management, 2e (Pinto) - AnvariNet.doc

Project Management, 2e (Pinto)Chapter 7 Risk Management7.1 True/False1) The risk is highest in the earliest phase of the project life cycle.Answer: TRUEDiff: 1Section: 7.0 IntroductionSkill: FactualAACSB Tag: Reflective2) As risk decreases in the project life cycle, opportunity increases.Answer: FALSEDiff: 1Section: 7.0 IntroductionSkill: FactualAACSB Tag: Reflective3) Risks can be quantified by multiplying the likelihood a failure will occur by the severity of the failure.Answer: TRUEDiff: 2Section: 7.0 IntroductionSkill: AnalyticalAACSB Tag: Analytic Skills4) Technical risk is the probability that the project will not perform to the required standards or produce substandard products or have excessive operating cost consumption.Answer: TRUEDiff: 2Section: 7.1 Risk Management: A Four-Stage ProcessSkill: FactualAACSB Tag: Reflective5) The probability that the investments made to fund the front-end activities will be lost due to project abandonment is financing risk.Answer: FALSEDiff: 2Section: 7.1 Risk Management: A Four-Stage ProcessSkill: DefinitionAACSB Tag: Reflective6) One approach to risk mitigation is simply to accept it.Answer: TRUEDiff: 2Section: 7.1 Risk Management: A Four-Stage ProcessSkill: FactualAACSB Tag: Reflective7) Risk cannot be transferred because ultimately your own project will suffer the consequences if the event occurs.Answer: FALSEDiff: 2Section: 7.1 Risk Management: A Four-Stage ProcessSkill: FactualAACSB Tag: Reflective8) Contingency reserves require a construction company to hold back some funds in an account just in case something happens that increases the overall project cost.Answer: TRUEDiff: 2Section: 7.1 Risk Management: A Four-Stage ProcessSkill: FactualAACSB Tag: Reflective9) The highest dollar value of reserves is typically task contingency.Answer: FALSEDiff: 2Section: 7.1 Risk Management: A Four-Stage ProcessSkill: FactualAACSB Tag: Reflective10) The PRAM model for risk management proposes that risk management follow a life cycle much as projects follow a life cycle.Answer: FALSEDiff: 2Section: 7.2 Project Risk Management: An Integrated ApproachSkill: FactualAACSB Tag: Reflective7.2 Fill in the Blank1) _ is defined as the art and science of identifying, analyzing, and responding to risk factors throughout the life of a project and in the best interests of its objectives.Answer: Risk managementDiff: 1Section: 7.0 IntroductionSkill: FactualAACSB Tag: Reflective2) Risk is a function of the probability of an adverse event occurring and its _.Answer: consequencesDiff: 1Section: 7.0 IntroductionSkill: FactualAACSB Tag: Reflective3) The first step in the risk management process is _.Answer: (risk) identificationDiff: 2Section: 7.1 Risk Management: A Four-Stage ProcessSkill: FactualAACSB Tag: Reflective4) An agreement between two firms that has provisions for fixed costs or liquidated damages contains an element of _Answer: contractual or legal riskDiff: 3Section: 7.1 Risk Management: A Four-Stage ProcessSkill: FactualAACSB Tag: Reflective5) One technique that can be used to identify risk factors associated with a project is _.Answer: brainstorming or expert opinion or past history or multiple assessmentsDiff: 1Section: 7.1 Risk Management: A Four-Stage ProcessSkill: DefinitionAACSB Tag: Reflective6) There is always a chance that different entities that should work together to complete a project wont be able to do so. This likelihood is called _.Answer: integration riskDiff: 2Section: 7.2 Project Risk Management: An Integrated ApproachSkill: FactualAACSB Tag: Reflective7) A risk impact matrix displays an events _ and _.Answer: likelihood, consequenceDiff: 2Section: 7.1 Risk Management: A Four-Stage ProcessSkill: FactualAACSB Tag: Reflective8) A rule of thumb for project risk score calculations is that a risk score of _ is considered high risk.Answer: 0.70 or higherDiff: 2Section: 7.1 Risk Management: A Four-Stage ProcessSkill: FactualAACSB Tag: Analytic Skills9) A common method of transferring the risk of a cost overrun is to establish a(n) _.Answer: fixed-price contractDiff: 2Section: 7.1 Risk Management: A Four-Stage ProcessSkill: FactualAACSB Tag: Reflective10) A(n) _ process as part of risk mitigation strategies requires a useful documentation system that all partners in the project can access.Answer: change managementDiff: 2Section: 7.1 Risk Management: A Four-Stage ProcessSkill: FactualAACSB Tag: Reflective7.3 Multiple Choice1) The difference between projects that fail and those that are ultimately successful has to do with:A) the plans that have been made to deal with problems as they arise.B) the fact that a successful project doesnt encounter problems.C) whether the project is for an internal or external customer.D) whether the problem is time- or budget-related.Answer: ADiff: 1Section: 7.0 IntroductionSkill: FactualAACSB Tag: Reflective2) Project risk is highest during the:A) termination stage of the project life cycle.B) concept stage of the project life cycle.C) implementation stage of the project life cycle.D) development stage of the project life cycle.Answer: BDiff: 1Section: 7.0 IntroductionSkill: FactualAACSB Tag: Reflective3) Project risk is lowest during the:A) concept stage of the project life cycle.B) implementation stage of the project life cycle.C) termination stage of the project life cycle.D) development stage of the project life cycle.Answer: CDiff: 1Section: 7.0 IntroductionSkill: FactualAACSB Tag: Reflective4) The period of highest risk impact for a project risk exists primarily in the:A) development stage of the project life cycle.B) concept stage of the project life cycle.C) implementation stage of the project life cycle.D) termination stage of the project life cycle.Answer: DDiff: 1Section: 7.0 IntroductionSkill: FactualAACSB Tag: Reflective5) The greatest project risk occurs when:A) the probability of the event is high and the consequences of the event are high.B) the probability of the event is high and the consequences of the event are low.C) the probability of the event is low and the consequences of the event are high.D) the probability of the event is low and the consequences of the event are low.Answer: ADiff: 1Section: 7.0 IntroductionSkill: AnalyticalAACSB Tag: Analytic Skills6) The greatest project opportunity occurs when:A) the project is in the concept phase.B) the project is in the development phase.C) the project is in the implementation phase.D) the project is in the termination phase.Answer: ADiff: 1Section: 7.0 IntroductionSkill: FactualAACSB Tag: Reflective7) The amount a company has at stake in a project rises above the dollar value of opportunity in the:A) implementation phase.B) development phase.C) concept phase.D) termination phase.Answer: DDiff: 2Section: 7.0 IntroductionSkill: FactualAACSB Tag: Reflective8) Risk and opportunity:A) both increase throughout the project life cycle.B) vary inversely throughout the project life cycle.C) both decrease throughout the project life cycle.D) do not vary throughout the project life cycle.Answer: CDiff: 1Section: 7.0 IntroductionSkill: FactualAACSB Tag: Reflective9) To protect his poultry from meteorites, the gentleman farmer made hard hats for each bird and installed a meteor detection system that opened umbrellas throughout the yard if a meteor were detected. The safety of his flock thus assured, the farmer was surprised when he read his latest issue of Risk Management Magazine and discovered that this event was:A) high in consequence and high in probability.B) low in consequence and low in probability.C) low in probability and high in consequence.D) high in probability and low in consequence.Answer: CDiff: 2Section: 7.0 IntroductionSkill: AnalyticalAACSB Tag: Reflective10) Jim knew instinctively that his professor wouldnt appreciate it if he brought his single scoop of vanilla ice cream into the lecture hall with him. He could almost hear the inevitable question, Did you bring enough for everyone? To avert such an embarrassment, he practically inhaled his frozen confection as he raced down the hall. He had eaten ice cream in this fashion before and knew he would soon have an ice cream headache, which could be described as:A) high in consequence and high in probability.B) low in consequence and low in probability.C) low in probability and high in consequence.D) high in probability and low in consequence.Answer: DDiff: 1Section: 7.0 IntroductionSkill: FactualAACSB Tag: Reflective11) While thrilling, there is a chance that you would have an accident if you elected to drive on the Autobahn while blindfolded, an outcome that could be described as:A) high in consequence and high in probability.B) low in consequence and low in probability.C) low in probability and high in consequence.D) high in probability and low in consequence.Answer: ADiff: 1Section: 7.0 IntroductionSkill: FactualAACSB Tag: Reflective12) Risk management is a:A) three-stage process.B) four-stage process.C) five-stage process.D) six-stage process.Answer: BDiff: 2Section: 7.1 Risk Management: A Four-Stage ProcessSkill: FactualAACSB Tag: Reflective13) The construction foreman posted a large sign requiring all work site visitors to don a hard hat and safety glasses. He also purchased copious quantities of both items and made them readily available at the entrance. The foreman is engaged in:A) risk identification.B) risk mitigation.C) analysis of probability and consequences.D) control and documentation.Answer: BDiff: 2Section: 7.1 Risk Management: A Four-Stage ProcessSkill: ConceptualAACSB Tag: Reflective14) The residents of Enumclaw, Washington, live in the shadow of majestic Mount Rainier and its 26 glaciers. The Cascades form a ring of fire around the Pacific Northwest and erupt with surprising regularity, although Mount Rainier hasnt erupted on a major scale since about a thousand years ago. When it does erupt, the pyroclastic flow (a massive cloud of superheated ash and rock up to 1500 degrees Fahrenheit that can travel at speeds up to 300 miles per hour) will make Enumclaw a less pleasant place to live. City leaders have completed the:A) control and documentation phase of risk management.B) risk identification phase of risk management.C) analysis of probability and consequences phase of risk management.D) risk mitigation strategies phase of risk management.Answer: CDiff: 2Section: 7.1 Risk Management: A Four-Stage ProcessSkill: ConceptualAACSB Tag: Reflective15) The mouse executive board meeting was drawing to a conclusion; the only way they would be able to detect the presence of the cat was to tie a bell around its tail. Under their risk management identification scheme, this would fall under:A) commercial risk.B) execution risk.C) financial risk.D) technical risk.Answer: DDiff: 2Section: 7.1 Risk Management: A Four-Stage ProcessSkill: ConceptualAACSB Tag: Reflective16) A method for conducting risk factor identification that consolidates the judgments of isolated anonymous respondents is:A) a brainstorming meeting.B) the Delphi method.C) past history.D) multiple assessments.Answer: BDiff: 2Section: 7.1 Risk Management: A Four-Stage ProcessSkill: DefinitionAACSB Tag: Reflective17) A method for conducting risk factor identification that generates ideas but doesnt focus on decision-making is:A) a brainstorming meeting.B) the Delphi method.C) past history.D) multiple assessments.Answer: ADiff: 2Section: 7.1 Risk Management: A Four-Stage ProcessSkill: DefinitionAACSB Tag: Reflective18) One source of information on future risks and the leading indicators that accompany risks is:A) a brainstorming meeting.B) the Delphi method.C) past history.D) multiple assessments.Answer: CDiff: 2Section: 7.1 Risk Management: A Four-Stage ProcessSkill: FactualAACSB Tag: Reflective19) The terpsichorean was familiar with the risks associated with various moves, the accountant knew financial risks forwards and backwards, while the civil engineer could quantify the risks associated with distributed loads on the temporary stage. Their input was used as part of:A) a brainstorming meeting approach to risk factor identification.B) the Delphi method approach to risk factor identification.C) a past history approach to risk factor identification.D) a multiple assessments approach to risk factor identification.Answer: DDiff: 2Section: 7.1 Risk Management: A Four-Stage ProcessSkill: ConceptualAACSB Tag: Reflective20) The probability that project revenues will not be sufficient to repay the debts is:A) financial riskB) cost estimate risk.C) market risk.D) promotion risk.Answer: ADiff: 2Section: 7.1 Risk Management: A Four-Stage ProcessSkill: DefinitionAACSB Tag: Reflective21) The probability that funds allocated to the project will be insufficient to complete it is:A) technical risk.B) cost estimate risk.C) financing risk.D) operating risk.Answer: BDiff: 3Section: 7.1 Risk Management: A Four-Stage ProcessSkill: DefinitionAACSB Tag: Reflective22) The probability that investments made to fund the front-end activities will be lost due to project abandonment is:A) promotion risk.B) political risk.C) organizational risk.D) financial risk.Answer: ADiff: 3Section: 7.1 Risk Management: A Four-Stage ProcessSkill: DefinitionAACSB Tag: Reflective23) There is always a chance that the music loving public cannot be convinced of the need to return to the 8-track format for new releases. The probability that we dont sell one million units before the holiday season is:A) promotion risk.B) market risk.C) organizational risk.D) financial risk.Answer: BDiff: 1Section: 7.1 Risk Management: A Four-Stage ProcessSkill: ConceptualAACSB Tag: Reflective24) Based on the projected selling price of $20 per unit, the manufacturer invested a substantial portion of its available cash in a machine that could produce twenty-thousand gumballs in an hour. If consumers werent willing to pay this much for gum, then the manufacturer faced significant:A) financial risk.B) promotion risk.C) cost estimate risk.D) market risk.Answer: DDiff: 1Section: 7.1 Risk Management: A Four-Stage ProcessSkill: ConceptualAACSB Tag: Reflective25) The probability that legal and managerial structures put together to develop and operate the project will not perform well is:A) operating risk.B) political risk.C) organizational risk.D) integration risk.Answer: CDiff: 3Section: 7.1 Risk Management: A Four-Stage ProcessSkill: DefinitionAACSB Tag: Reflective26) The probability that a project to establish infrastructure in a third-world country teetering on the brink of civil war is fraught with:A) political risk.B) operating risk.C) organizational risk.D) integration risk.Answer: ADiff: 1Section: 7.1 Risk Management: A Four-Stage ProcessSkill: DefinitionAACSB Tag: Reflective27) The marketing team would develop the advertising campaign to promote the newest product but the engineers wanted to keep all product details a secret during development. The service and operations branches of the company were also in the dark, so product rollout was going to be their initiation also. This project has a very high:A) political risk.B) integration risk.C) organizational risk.D) integration risk.Answer: BDiff: 1Section: 7.1 Risk Management: A Four-Stage ProcessSkill: ConceptualAACSB Tag: Reflective28) The house had almost been framed when an F-5 tornado ripped across the plains and turned the house back into a lumber pile, not stacked as neatly as it was originally. The homeowners fears of:A) technical risks had come true.B) operating risks had come true.C) acts of God had come true.D) environmental risks had come true.Answer: CDiff: 1Section: 7.1 Risk Management: A Four-Stage ProcessSkill: ConceptualAACSB Tag: Reflective29) The probability that a project will overrun its allocated duration is:A) volume market risk.B) price market risk.C) integration risk.D) schedule risk.Answer: DDiff: 2Section: 7.1 Risk Management: A Four-Stage ProcessSkill: DefinitionAACSB Tag: Reflective30) A serious risk factor probably has:A) a high consequence and a medium likelihood.B) a high consequence and a low likelihood.C) a medium consequence and a low likelihood.D) a low consequence and a medium likelihood.Answer: ADiff: 2Section: 7.1 Risk Management: A Four-Stage ProcessSkill: AnalyticalAACSB Tag: Reflective31) A project team assesses their primary risk factors probability of failure with a maturity risk of 0.2, a complexity risk of 0.6, and a dependency risk of 0.9. The probability of failure is:A) less than or equal to 0.3.B) greater than 0.3 but less than or equal to 0.6.C) greater than 0.6 but less than or equal to 0.9.D) greater than 0.9.Answer: BDiff: 2Section: 7.1 Risk Management: A Four-Stage ProcessSkill: AnalyticalAACSB Tag: Analytic S