Practice Test

Risk analysis is an integral part of project management.

  • A) True
  • B) False

Answer: A) True

Explanation: Risk analysis is important for understanding uncertainties in project objectives, and the impact it might have on the project outcome.

All risks are negative to a project.

  • A) True
  • B) False

Answer: B) False

Explanation: Risks can be both negative or positive. Negative risks are threats while positive risks are opportunities.

Which of the following is not a part of risk management?

  • A) Risk identification
  • B) Risk assessment
  • C) Risk avoidance
  • D) Risk transfer

Answer: C) Risk avoidance

Explanation: While risk mitigation and risk transfer are part of risk management, risk avoidance is not always feasible or the best practice in most project management strategies.

Risk appetite is an organization’s willingness to take on risk.

  • A) True
  • B) False

Answer: A) True

Explanation: Risk appetite is the level of risk that an organization is prepared to accept in pursuit of its objectives.

Who plays the key role in risk management?

  • A) Executive management
  • B) Project team members
  • C) Project managers
  • D) All of the above

Answer: D) All of the above

Explanation: Everyone involved in the project has a responsibility in managing risks, including the executive management, project managers, and project team members.

The risk register is not crucial in managing project risks.

  • A) True
  • B) False

Answer: B) False

Explanation: The risk register is a key document that helps in identifying, assessing, and tracking risks.

High impact risks are always prioritized over low impact risks.

  • A) True
  • B) False

Answer: B) False

Explanation: Not always. Risks are prioritized based on their impact and probability, not just impact alone.

Risk response strategies for negative risks include all the following except?

  • A) Risk avoidance
  • B) Risk transfer
  • C) Risk acceptance
  • D) Risk maximization

Answer: D) Risk maximization

Explanation: Risk maximization is not a strategy used for negative risks, it’s typically used for positive risks.

It is not necessary to continually monitor and review risks throughout the project lifecycle.

  • A) True
  • B) False

Answer: B) False

Explanation: It is important to monitor and review risks throughout the project to ensure effective risk management.

A project’s risk analysis should be communicated to all stakeholders.

  • A) True
  • B) False

Answer: A) True

Explanation: Effective risk communication is crucial for ensuring all stakeholders understand the potential risks and the strategies in place to manage them.

Which is the final step in the risk management process?

  • A) Risk Identification
  • B) Risk Analysis
  • C) Risk Response
  • D) Risk Monitoring

Answer: D) Risk Monitoring

Explanation: Risk Monitoring is the final step in which the identified risks are continuously monitored and reviewed during the project lifecycle.

Project risk decreases as the project progresses.

  • A) True
  • B) False

Answer: A) True

Explanation: As the project progresses, more information becomes available and uncertainties usually decrease, hence the project risk decreases.

Risk tolerance refers to an organization’s readiness to bear the risk after risk treatment in order to achieve its objectives.

  • A) True
  • B) False

Answer: A) True

Explanation: Risk tolerance refers to the degree of uncertainty that an organization is willing to accept in relation to achieving its objectives.

The outcome of a risk assessment is always precise.

  • A) True
  • B) False

Answer: B) False

Explanation: A risk assessment provides an estimation not an exact value, it’s based on the available data, analysis techniques and level of understanding of the project.

A risk with a high probability of occurrence but low impact should be ignored.

  • A) True
  • B) False

Answer: B) False

Explanation: No risk should be ignored, as even a risk with a low impact could still affect the project’s objectives if it occurs.

Interview Questions

What are some common risk categories that you might analyze in a project’s general risks?

Typical risk categories include strategic, operational, financial, human resources, legal and regulatory, technology, and market and environmental risks.

What are the basic steps of risk management in project management?

The basic steps of risk management are risk identification, risk assessment, risk response planning, risk monitoring and control.

What are the key components of a risk register?

A risk register typically includes the following sections: Risk ID, Risk Description, Risk Owner, Impact assessment, Probability, Risk Rating, Mitigated by, Response Strategy, Contingency Plan and Date Identified.

What’s the purpose of a risk response plan?

A risk response plan outlines the strategies and actions to take when identified risks occur. It ensures all stakeholders know what to do in a risk scenario.

How would you assess the likelihood and impact of risks on your project?

The likelihood and impact of risks can be assessed by creating a risk matrix. This tool allows us to rank risks based on their potential impact and probability of occurrence.

What is the difference between qualitative and quantitative risk analysis?

Qualitative risk analysis prioritizes risks through a subjective approach, often using matrixes or diagrams for impact and likelihood. Quantitative risk analysis, on the other hand, makes use of numerical techniques to analyze the probability and impacts of risks.

What is the purpose of risk monitoring?

Risk monitoring ensures identified risks are tracked over time, and it helps teams identify any new risks. It also provides insight into the effectiveness of risk response plans and control activities.

What does risk tolerance refer to in risk management?

Risk tolerance refers to the level of uncertainty or risk that an organization or stakeholders are willing to accept or withstand.

What are appropriate risk mitigation strategies that could be used in a project?

Appropriate risk mitigation strategies could include risk avoidance, risk reduction, risk sharing, and risk retention.

What is a SWOT analysis and how can it help in risk management?

SWOT analysis stands for Strengths, Weaknesses, Opportunities, and Threats. It can help in risk management by identifying internal and external factors that can affect the project’s success.

What is a risk breakdown structure (RBS)?

A risk breakdown structure (RBS) is a hierarchical depiction of the identified risks arranged by risk category and subcategory that helps in identifying, estimating, and evaluating risks.

What would be considered in assessing the risk impact?

The severity of the consequences if the risk event occurs would be considered in assessing the risk impact. This could be in terms of cost, time, quality or other project objectives.

What’s the difference between risk and uncertainty?

Risk refers to events that have known probabilities of occurrence and their outcomes are also known. Uncertainty, on the other hand, refers to events the probability of whose occurrence and/or outcomes are not known.

Why is it important to communicate risks to stakeholders?

Communicating risks to stakeholders allows them to understand potential problems that may impact the project’s outcomes. It also helps to ensure everyone has a shared understanding of the project’s risk profile and risk management strategy.

What is the purpose of conducting a post-project review in terms of risk management?

Conducting a post-project review provides an opportunity to learn from the project’s risks and responses, whether successful or not, to improve risk management in future projects.

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