Practice Test

True or False: The process of identifying risk origins is crucial for effective risk management.

  • True
  • False

Answer: True.

Explanation: Identifying the origins of risk provides a foundation to understand the root causes of risks and develop effective risk management strategies.

Multiple select: Who can own a risk in a project?

  • (a) Project Manager
  • (b) Project Team Members
  • (c) Stakeholders
  • (d) All of the above

Answer: (d) All of the above.

Explanation: Risk can be owned by any individual or group involved in the project who has the capability to manage the risk.

True or False: External risks are easier to control than internal risks.

  • True
  • False

Answer: False.

Explanation: External risks, such as changes in government policy or market instability, are often beyond the control of the project team.

Single select: Internal risks arise from _.

  • (a) Natural phenomena
  • (b) Organizational structure
  • (c) Political instability

Answer: (b) Organizational structure

Explanation: Internal risks are associated with the organization’s processes, people, or systems, like organizational structure.

Multiple select: Which of the following are examples of internal risks?

  • (a) Earthquake
  • (b) Inadequate training
  • (c) Faulty equipment
  • (d) Government policy changes

Answer: (b) Inadequate training, (c) Faulty equipment

Explanation: Both inadequate training and faulty equipment are examples of internal risks because they are within the organization’s control and arise from its operations.

True or False: Risk owners are always on the project team.

  • True
  • False

Answer: False.

Explanation: While often the case, risk owners could also include stakeholders, sponsors, or any other individual or group who can manage the risk.

Single select: Which kind of risk is most directly related to operational capabilities?

  • (a) Technical risk
  • (b) Market risk
  • (c) Strategic risk

Answer: (a) Technical risk

Explanation: Technical risks are related to operational issues such as equipment failure, process inefficiency, etc.

True or False: Risk ownership is the sole responsibility of the risk management team.

  • True
  • False

Answer: False.

Explanation: Risk ownership may be assigned to any individual or group who has the ability to manage that risk, not just the risk management team.

Multiple select: What are key factors in establishing risk ownership?

  • (a) Level of risk
  • (b) Skills and resources to manage the risk
  • (c) Budget constraints
  • (d) All of the above

Answer: (d) All of the above

Explanation: Various factors like risk level, resources, and budget constraints influence who is best suited to own and manage a particular risk.

True or False: Internal risks can be predicted with complete accuracy.

  • True
  • False

Answer: False.

Explanation: Although internal risks are often within an organization’s control, they cannot be predicted with complete accuracy due to the inherent uncertainty in risk forecasting.

True or False: An identified risk owner has the responsibility to monitor and control the risk.

  • True
  • False

Answer: True.

Explanation: A risk owner is accountable for managing, monitoring, and controlling the identified risk effectively.

Single select: Could changes in legal regulations be considered as external risks?

  • (a) Yes
  • (b) No

Answer: (a) Yes.

Explanation: Legal regulations are beyond the control of an organization and are, therefore, considered external risks.

Multiple select: What are elements of risk origin?

  • (a) Cost
  • (b) Schedule
  • (c) Scope
  • (d) Quality

Answer: (a) Cost, (b) Schedule, (c) Scope, (d) Quality

Explanation: Any change in cost, schedule, scope and quality can be an origin of a risk.

Single select: Does regularly updating the risk register help in effective risk management?

  • (a) Yes
  • (b) No

Answer: (a) Yes

Explanation: Regularly updating the risk register keeps track of the risk origin, risk owner and risk response, thus helping in effective risk management.

Interview Questions

What are the two main categories for identifying the origin of risks in a project?

The two main categories for identifying the origin of risks are internal and external.

What is an internal risk?

An internal risk is a risk that arises from within the project and can be controlled and managed by the project team.

What is an external risk?

An external risk is a risk that originates outside the project. These are outside the control of the project team and need to be managed or mitigated by external persons or organizations.

Which risk type can be controlled by the project manager?

The project manager can control internal risks.

Who takes ownership for an external risk?

Typically, the stakeholder who has the necessary capability and influence over the external environment may take ownership for an external risk.

Can a single risk have multiple owners?

Yes, a single risk can indeed have multiple owners. Ownership may be shared among multiple stakeholders based on their involvement or impact on the risk or its outcome.

What is meant by risk ownership?

Risk ownership is the assignment of a person or organization as a risk owner. A risk owner is responsible for responding to the risk and managing it through its lifecycle.

How can risks be identified in a project?

Risks can be identified through various methods like SWOT analysis, brainstorming sessions, Delphi technique, using checklists, and conducting interviews among other techniques.

Why is it crucial to establish risk origin and ownership in risk management?

Establishing risk origin and ownership is crucial because it helps to ensure that the right resources are allocated to manage each risk, and that each risk is managed by someone with the appropriate authority and influence.

Can risk ownership be transferred?

Yes, risk ownership can be transferred. However, the transfer should be formally documented and communicated to ensure that the new owner understands their responsibility.

Can internal risks turn into external risks or vice versa?

Yes, changes in project conditions, environment or scope can lead to internal risks becoming external and vice versa.

What happens if a risk owner cannot be committed for an internal risk?

If a risk owner cannot be committed for an internal risk, an alternative risk owner with sufficient authority and knowledge should be assigned.

Is it possible for an external risk to be unmanaged?

Yes, an external risk may be unmanaged if its ownership is not assigned or if it’s beyond the control of the project. In such cases, contingent plans need to be in place.

What is the role of the project manager in managing external risks?

The project manager plays a key role in coordinating with the external owners of these risks and incorporating their risk response plans into the overall project risk management plan.

Are project risks always negative or can they be positive as well?

Risks can be both negative (threats) and positive (opportunities). Both types of risks must be identified and managed effectively in every project.

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