Chapter 8: Managing Project Risk
True/False
1. Failure to follow a formal risk management plan will often cause organizations to be reactive and find themselves in a state of perpetual crisis, a condition known as crisis management.
2. The best time to plan for risk is during the project execution phase when risk can be assessed most accurately.
3. Effective project risk management requires that each risk have an owner.
4. In general, because of the similarities in IT projects, one can manage all projects and risks in the same manner.
5. Project risk management focuses solely on the downside that results from unexpected problems or threats.
6. The PMBOK® definition of project risk suggests that a systematic process is needed to effectively manage the risk of a project.
7. It never pays to ignore an element of project risk.
8. The goal of a sound risk management is to completely avoid all risk.
9. Triggers or flags in the form of metrics should be identified to draw attention to a particular risk when it occurs.
10. Unknown-unknown risks are residual risks that we cannot even imagine happening.
11. Since risk arises from uncertainty, there can be no such category as known risks.
12. Learning cycles can be used as a tool for identifying threats and opportunities.
13. Nominal Group Technique is a free form, unstructured process similar to Brainstorming.
14. The fishbone or Ishikawa diagram is a form of cause and effect analysis diagramming.
15. Since IT projects are developed in an environment that changes so rapidly and so extensively, there is little value in using past projects to guide our risk assessment of new ones.
16. Qualitative risk analysis has as one of its strengths the ability to include subjective analysis based on experience and judgment.
17. The concept of expected value rests on the notion of a probability-weighted summation of component parts.
18. Discrete Probability Distributions use only integers where fractions would make no sense.
19. In Tusler’s risk classification scheme, Alligators are risks with a high probability of occurrence and impact.
20. The area under the normal distribution curve that lies within 2 standard deviations of the mean (plus or minus) includes about 68% of all the values.
21. Sensitivity analysis is used to determine the joint effects of multiple risky tasks, while Monte Carlo Simulation is used to measure which individual tasks pose the greatest project risk.
22. The deployment of a specific risk management strategy is in part a function of risk tolerance levels of the stakeholders.
23. Risk audits, reviews, status meetings, and reports are tools for risk monitoring and control.
Multiple Choice
1. The Project Management Body of Knowledge (PMBPK) that defines the process of risk management includes all of the following processes except:
a) Risk Mangement Planning
b) Risk Identification
c) Qualitative Risk Analysis
d) IT Project Risk Impact Analysis
e) Risk Response Planning
2. Identifying what you know, what you think you know, and things you need to find out are activities most closely associated with:
a) Learning Cycles
b) Brainstorming
c) Nominal Group Technique
d)
e) Cause-and-Effect Diagrams
3. Gaining consensus from a group of experts would be most closely associated with:
a) Learning Cycles
b) Brainstorming
c) Nominal Group Technique
d)
e) Cause-and-Effect Diagrams
4. Initial generation of ideas without evaluation would be most closely associated with:
a) Learning Cycles
b) Brainstorming
c) Nominal Group Technique
d)
e) Cause-and-Effect Diagrams
5. A structured technique for identifying risks which requires participants to rank and prioritize ideas in round-robin fashion is most closely associated with:
a) Learning Cycles
b) Brainstorming
c) Nominal Group Technique
d)
e) Cause-and-Effect Diagrams
6. In which step of the risk planning process does the text say one might decide to transfer project risk to someone else (i.e.,use insurance)?
a) risk planning
b) risk identification
c) risk assessment
d) risk strategies
e) risk monitoring and control
7. Receiving a much larger than usual gas utility bill because of an early spring cold spell is an example of what type of risk?
a) known risk
b) known-unknown risk
c) unknown-unknown risk
d) known-known
e) none of the above
8. Which of the following does not represent a quadrant in Tusler's Risk Classification Scheme?
a) Kittens
b) Puppies
c) Tigers
d) Alligators
e) Lions
9. Tusler would classify risks that have a high probability of occuring but a low impact on the project as:
a) Kittens
b) Puppies
c) Tigers
d) Alligators
e) Lions
10. Which of the following distributions has mean which is equal to (a + 4b +c) / 6 where a, b, and c are denote optimistic, most likely, and pessimistic estimates respectively?:
a) Discrete Distribution
b) Normal Distribution
c) Pert Distribution
d) Triangular Distribution
e) Binomial Distribution
11. Which of the following distributions has mean which is equal to (a +b +c) / 3 where a, b, and c are denote optimistic, most likely, and pessimistic estimates respectively?:
a) Discrete Distribution
b) Normal Distribution
c) Pert Distribution
d) Triangular Distribution
e) Binomial Distribution
12. In a normal distribution we would expect to find _______ of all values with in + or - 1 standard deviation.
a) 13%
b) 34%
c) 68%
d) 95%
e) 99%
Short Answer Questions from End Of Chapter Review Questions
1. What leads to uncertainty in an IT project?
2. How does a project risk management approach provide an early warning signal for impending problems or issues?
3. What is meant by crisis management? Why do many organizations find themselves in this mode?
4. Describe some of the common mistakes in project risk management.
Common mistakes in managing project risk include:
5. Briefly describe what is required for effective and successful project risk management.
6. What is project risk?
7. What is project risk management?
8. What are the seven IT project risk management processes?
9. What types of commitment are necessary for risk planning?
10. Why can identifying IT project risks be difficult?
11. What is a “known” risk? Give an example of one.
12. What is a “known-unknown” risk? Give an example of one.
13. What is an “unknown-unknown” risk? Give an example of one.
14. What is the difference between an internal and external risk? Give an example of each.
15. Describe some of the tools and techniques that can be used to identify IT project risks.
16. Describe the nominal group technique and how it can be applied to identifying IT project risks.
17. Describe how learning cycles can be used to identify IT project risks.
18. What is the
19. How can interviewing be used as a technique for identifying IT project risks? What are some of the advantages and disadvantages of using this technique?
20. How do checklists help in identifying IT project risk? Discuss the pros and cons of using this technique.
21. What is SWOT analysis? How can this technique be used to identify IT project risks?
22. What is a fishbone (Ishikawa) diagram? How can this tool be used to identify IT project risks?
23. What is the purpose of risk analysis and assessment?
24. What is the difference between qualitative and quantitative risk analysis?
25. Describe the concept of expected value.
26. What is the purpose of a decision tree? What are the advantages and disadvantages of using a decision tree?
27. What is the purpose of a risk impact table?
28. What is the difference between a discrete probability distribution and a continuous probability distribution?
29. What are the rules of thumb that can be applied to a normal distribution?
30. Compare and contrast normal distribution, PERT distribution, and triangular distribution.
31. What is a simulation? What value do simulations provide when analyzing and assessing IT project risks?
32. What is a
33. Define and discuss the four risk strategies described in this chapter.
34. What is the difference between a management reserve and a contingency reserve?
35. What is a contingency plan?
36. Why can’t a project team respond to all project risks?
37. What is a risk response plan? What should be included?
38. What are risk triggers or flags?
39. Why is having a risk owner a good idea? What role does a risk owner play?
40. What is risk monitoring and control?
41. Describe the three risk monitoring tools that were discussed in this chapter.
42. What is the purpose of evaluating a response to a particular risk?
Essay Questions
1. The text discusses three common mistakes found in managing project risk. Choose two of them and after stating them, discuss the implications of making that mistake.
2 What should be required of project stakeholders with regard to managing project risk successfully?
3. PMBOK® suggests a seven step systematic process for effectively managing project risk. Briefly describe these seven steps in order.
4. Compare the three types of project risk: known, known-unknown, and unknown-unknown. Give an example of each.
5. What are the strengths and weaknesses of using the Delphi Technique for identifying threats and opportunities?
6. What are the potential advantages that qualitative approaches have over quantitative ones when it comes to risk analysis and assessment?
7. Describe each of Tusler’s four quadrant-menagerie of risk classification
8. How is a
9. What factors determine the appropriate risk strategy to deploy?
10. The text discusses four main risk response strategies. Briefly describe them and the implications of choosing one over another.
11. Describe some of the tools that are typically employed to monitor and control risk.
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