When the project manager discovers that the project team lacks the necessary expertise to define the risk management plan, they should collaborate with subject matter experts to address the knowledge gap. This will help ensure that the risk management plan is properly defined and that the project team has the necessary knowledge to execute it effectively. While training may be scheduled before releasing the team, it is important to address the knowledge gap as soon as possible to avoid any potential risks to the project.

The other options are incorrect.

Replacing the team may not be possible or necessary. This action also does not address the knowledge gap proactively.

Independently creating the plan is not collaborative and does not provide the team with the opportunity to learn from the process.

Delaying planning is not appropriate in this scenario because there is no time for immediate planning. Training will be provided, but there is no indication of when it will occur, hence, making it inadvisable to delay planning.

Secondary risks are those risks that arise as a direct outcome of implementing a risk response. Simply put, you can say that you have identified a risk and created a response plan to manage this risk. However, if you implement this risk response plan, there is a chance of a new risk. This new risk caused by the response plan is known as the secondary risk. Secondary risks are also evaluated for their severity. They may or may not need a response plan depending on their impact on the project objective. If the impact is high, you will create a response plan; if it is negligible, you will just keep them on the watch list. Taking no action is not an appropriate response as secondary risks are important and can have a big impact. It would not be appropriate to inform the project manager about the occurrence because it has not occurred yet. The risk manager is performing risk response planning. First, you would produce an agreed risk description, assess the probability and impacts, and select an appropriate response strategy for the secondary risk. The same applies to performing an analysis to calculate the estimated required budget for the secondary risk and propose to increase the management reserve accordingly, making it incorrect.

As a project manager, it is important to manage the influence that a few individuals may have on the risk management process. The best approach is to establish a collaborative and transparent approach to risk management that engages all stakeholders. This will ensure that all perspectives are taken into account and that decisions are made based on a consensus rather than the personal perceptions and interests of a few individuals.

The other options are incorrect.

Requiring all stakeholders and executive leadership to commit to a standardized organizational risk attitude or dedicating a team member to monitor changes in individual risk attitudes are less proactive and may not be as effective in managing the influence of a few individuals.

Facilitating a meeting with highly influential individuals and requesting that they do not share their risk attitudes may also not be effective as it may not address the underlying issue of personal perceptions and interests influencing the risk management process.

This involves evaluating the proposed risk response strategies to ensure that they are feasible and appropriate for the identified risks and that they align with the project’s objectives and constraints. For example, the team has identified a risk of “delayed supply X delivery” as well as the risk response of “engaging vendor Y who is more expensive but also can deliver supply X faster”. Once risks and response strategies are identified, the team also needs to evaluate the implications of employing such risk response on the rest of the project. This includes evaluating the impact on overall costs, timelines, stakeholder relationships, and so forth. It’s also important to ensure that all stakeholders are aware of the proposed risk response strategies and agree to them. By doing so, the project team can ensure that the risk response plan is effective and can be implemented successfully.

The project manager should analyze the impact of replacing the resources and exploit the opportunity if it is found to be appropriate. Many factors should be considered before deciding because the existing team members may be highly skilled or integral to the project in other ways and removing them could be detrimental to the project. This analysis will involve assessing the skills and experience of the new resources and determining how they can be best utilized to achieve the project objectives. The project manager should also consider the impact of replacing existing team members and ensure that the transition is managed effectively to minimize any disruption to the project. By analyzing the impact of replacing the resources and exploiting the opportunity, the project manager can ensure that the project is completed successfully and within budget.

The other options are incorrect.

Initiating a change request is premature at this time because the project manager should assess the situation before making any decisions. A change request may not be necessary if the project manager determines that it is best not to replace any members of the team.

Declining or accepting the resources without analyzing the impact the replacement will have on the project is irresponsible and could negatively impact the project.

Company A is using the transfer strategy to deal with the risk of transporting the machine from their facility. By transferring the responsibility and liability to Company B once the machine leaves Company A’s facility, Company A is effectively transferring the risk associated with transportation to Company B. This is a common risk management strategy used when a party is unwilling or unable to assume the risk associated with a particular activity or event.

The other options are incorrect.

Avoiding the risk would be to completely eliminate or forego risk, which is not the case here. To mitigate the risk is not correct because Company A did not reduce the likelihood or impact of risk, they transferred the responsibility to Company B. Accept is incorrect because Company A did not accept the risk, they do not want the risk of transporting the machine, so they transferred the risk to Company B.

The main reason for such a deviation is linked to the risk identification process. It seems that the risk that the SME may not allocate enough time was not identified, or not pointed out as relevant, so it was not correctly addressed (monitoring with preventing action plan). The emergent nature of risk requires the risk management process to be iterative, repeating the risk identification activities in order to find risks that were not previously evident. It may also point out a low frequency of risk review meetings. It is possible that the SME does not understand the importance and impact of participation. This scenario provides an opportunity for the risk manager to coach the project manager responsible for the project on the importance of risk identification and participation.

Monte Carlo analysis is a quantitative risk analysis technique that uses probability distributions to simulate the possible outcomes of a project. It can be used to estimate the probability of achieving specific cost targets by simulating the impact of various risks and uncertainties on the project’s cost estimates. Monte Carlo analysis computes the schedule or cost estimate many times using inputs drawn at random from ranges specified ed with probability distribution functions for schedule activity durations or cost-line items.

The other options are incorrect.

A decision tree analysis can be used to support the selection of the best of several alternative courses of action, but the question does not mention a choice between alternatives.

Analogous estimating is a method for estimating the duration or cost of an activity or a project using historical data from a similar activity or project. It would not be helpful when considering current risk data and cost estimates for a current project.

Brainstorming is a technique for generating spontaneous ideas and is typically used as a group risk identification method, but not for the purposes of the question.

The implementation of a risk response plan necessitates a change in the current project management plan. Issuing a change request is the appropriate action to request the necessary budget, address rescheduling, and incorporate new activities into the scope.
The management reserve is typically reserved for unidentified risks. Since the risk has already been identified, the management reserve cannot be used to cover the cost of the risk response plan.
Asking the project sponsor for an additional budget would require a change request.
If the contingency reserve is not sufficient to cover the cost of the risk response plan, then the project manager should issue a change request to ask for additional funding.

The project manager should have assigned a risk action owner after the risk response strategies have been identified. This is because the risk action owner is responsible for implementing the specific risk response actions that have been identified in the risk management plan. Once the risk response strategies have been identified, the risk action owner can be assigned to implement the specific actions that have been identified in the risk management plan. It is important to assign a risk action owner to ensure that the risk response actions are implemented effectively and in a timely manner.

The other options are incorrect.

The risk action owner should have been assigned prior to monitoring risks. Risk analysis may help determine the best risk response strategies, but not assigning risk action owners. Assigning a risk action owner prior to establishing a risk management plan is premature.

The risk manager should encourage the team to be proactive by tracking identified risks, watching residual risks, identifying new risks, and evaluating risk management success when monitoring risks. This helps to ensure that risk identification becomes a natural part of every process and that risk management practices are most effective when supported by a culture that embraces proactive behavior, open communication, organizational learning, and continuous improvement.
The other options are incorrect.
Developing risk responses and creating a risk management plan is incorrect because these activities should take place during the planning process. Updating the lessons learned documents, developing risk responses, and creating the risk management plan are not correct because these activities should take place during the planning process. Reviewing lessons learned documents to identify risks, quantify risks, and lower impact ratings are not correct because th

In order to make the decision, the project manager should evaluate the potential benefits of hiring an external risk manager with specific technical expertise against the costs of doing so. This analysis should consider factors such as the complexity of the project, the level of technical expertise required, and the potential impact of not having this expertise.

The other options are incorrect.

Identifying internal resources with proper knowledge may not be possible due to the complexity of the project and the lack of knowledge within the domain. Even if an internal resource is identified, they may not be available and the project manager should have searched for internal resources before considering hiring an external expert. When choosing between utilizing an internal resource or an external resource, a cost-benefit analysis should still be performed.

Hiring the expert without analysis is unadvisable because the cost may outweigh the benefits realized.

Hiring a specialized risk analysis company is not being considered and would still require a cost-benefit analysis.

The project team is typically designated as risk owners because they are often key participants in risk identification. All project stakeholders should be encouraged to identify individual project risks, but it is particularly important to involve the project team so they can develop and maintain a sense of ownership and responsibility for identified individual project risks, the level of overall project risk, and associated risk response actions.
The other options may be assigned as risk owners, but they are less likely options as project team members typically act as risk owners.

Based on the characteristics of the new project described, the level of stakeholder risk appetite is high and the appropriate risk strategy is to leverage historical project planning data, develop standard metrics and reports, and develop a formal risk management plan. This will help the project team to effectively manage risks and make informed decisions. Stakeholder risk appetite refers to the level of risk that stakeholders are willing to accept in anticipation of a reward. The risk strategy should be aligned with the stakeholder risk appetite to ensure that risks are managed effectively.

Interviews should be conducted in an environment of trust and confidentiality to encourage unbiased input. Interviewing experienced project, program, or portfolio participants, stakeholders, and subject matter experts can identify risks.

Brainstorming typically involves an open group discussion and relies on active participation from the group. In this situation, some participants are hesitant to interact openly, suggesting that they may be more comfortable discussing things in a more personal setting such as an interview.

Performing a Monte Carlo simulation is incorrect because it is a tool for quantitative analysis of risks previously identified.

Requiring all participants to speak may make some participants uncomfortable which could lead to conflict, low morale, or further isolation.

Hosting meetings and interviews with key stakeholders allows the risk manager to gain an understanding of the stakeholders’ ability to tolerate uncertainty and the relative importance of achieving specific objectives. The risk manager should prepare a list of questions to ask stakeholders during the meetings and interviews to ensure that all relevant information is gathered. The output of this analysis is then considered when applying the risk management processes. As the work evolves, maintaining effective communications with the stakeholders enables teams to become aware of any changes in the stakeholders’ attitudes and adapt the risk management approach to take into account any new factors.
The other options are incorrect.
Reviewing past risk response strategies is not an effective way to determine risk appetites because every project is different and risk appetite can change over time and may vary among different projects.
Conducting a SWOT analysis focuses on internal (organizational strengths and weaknesses) and external (opportunities and threats) factors, not risk appetite.
A sensitivity analysis is used to determine which individual project risks have the most potential impact on project outcomes.

When designing the risk impact scale for a project, the project schedule should be prioritized as completing the project on time is critical. Other factors such as technical performance, project budget, and technical requirements should also be considered, but the project schedule should be given the highest priority in this case.

The technical performance and technical requirements are not project objectives hence, they are an incorrect response to this question. The project is not technically complex. Budget is an important consideration,  but as mentioned in the question, there are some reserves available, whereas the implementation timelines are described as rigorous. Hence cost is not the most crucial aspect.

The project manager should suggest considering canceling the project or scaling back the scope. This is because the overall project risk far exceeds the risk threshold for the organization, and proceeding with the project could potentially harm the organization’s success and growth. It is important to prioritize the organization’s risk appetite and make decisions that align with its overall strategy and goals. In this case, canceling the project or scaling back the scope may be the best option to align with the organization’s risk appetite and ensure the project’s success. The project manager should present this option to stakeholders and senior management and work with them to make a decision that aligns with the organization’s overall strategy and goals.

The first action the project manager should take is to meet with the project sponsor to report the current findings and develop a corrective course of action. This will help to ensure that the project is put back on track and that the necessary steps are taken to address the issues that have been identified.

To determine which risk has the greatest potential impact on cost and schedule using the expected monetary value (EMV) calculation, you must multiply the potential cost increase by the probability of occurrence for each risk. EMV calculations help prioritize risks by quantifying their potential financial impact. EMV is calculated by multiplying the probability that an event will occur and the economic impact the event would have should it occur.

Here are the EMV calculations for each risk:

Risk 1:

EMV = $500,000 x 0.25 = $125,000

Expected Schedule Impact = 60 days x 0.25 = 15 days

Risk 2:

EMV = $200,000 x 0.60 = $120,000

Expected Schedule Impact = 20 days x 0.60 = 12 days

Risk 3:

EMV = $1,200,000 x 0.10 = $120,000

Expected Schedule Impact = 90 days x 0.10 = 9 days

Risk 4:

EMV = $600,000 x 0.20 = $120,000

Expected Schedule Impact = 70 days x 0.20 = 14 days

Based on these calculations, Risk 1 has the greatest potential impact on cost with an EMV of $125,000. Additionally, Risk 1 also has the highest expected schedule impact of 15 days.

After a project risk assessment is complete, the best action to take is to use the assessment results in the day-to-day management of project risks. Incorporating the assessment results into the ongoing risk management activities helps to ensure that potential risks are proactively addressed and their impact on the project is minimized. This can help to mitigate risks and increase the chances of project success.

This is the correct response because it is the next step to be completed after the response is developed. The risk has been identified and added to the risk register, and a response has already been developed. The next step would be to communicate and monitor the risk response. The identified risk is continuously reviewed and reported at status meetings. The external customer does not need to be aware of the finite details relating to the project work, such as updating the risk register. Hiring more resources relates to planning a response strategy for the identified risk and will not be the next step after planning risk responses. Resisting the customer’s scope increase and maintaining the original testing requirements is incorrect. The customer’s request may be critical to achieving the successful outcome of the project and therefore will be put through the change control board to evaluate changes.

Updating the lessons learned database with risk management artifacts is the best way to address the audit findings. Recording risk management information, such as effective risk responses, in the lessons learned database, serves as a good source for future project work and is used to improve the performance of the project and to avoid repeating mistakes.

The other answers are incorrect because they describe the base functions and responsibilities of the project management office (PMO), regardless of the audit. The PMO will need to create and document the organizational processes assets before they will be available to merge and distribute risk logs. The primary function of the PMO is to support the project manager, which includes developing and managing project policies, procedures, and other shared documentation and organizational process assets. The PMO provides, as part of its basic functions, compliance monitoring of project management standards by means of project audits. These project management standards must first exist through the gathering and recording of information.

The project manager should schedule a face-to-face meeting with the project sponsor to discuss the concerns and potential consequences of manipulating the data used for the Monte Carlo simulation. It is important to maintain the integrity of the data and ensure that the risk rating accurately reflects the potential risks associated with the project.

If modeled and run properly, a Monte Carlo simulation will provide transparent cost justifications for risk response plans and a clear basis for project budget considerations. Both cost estimates and activity duration estimates need consideration of worst-case and best-case scenarios. A Monte Carlo simulation is only as good as the quality of information and effort put into it. In this case, manipulating the data to artificially reduce the risk rating could lead to inaccurate cost estimates and inadequate contingency plans, which could ultimately harm the project and the company. Therefore, it is important for the project manager to discuss the potential consequences with the project sponsor and find a solution that maintains the integrity of the data and accurately reflects the potential risks associated with the project.

The other options are not effective or ethical.

The PMI Code of Ethics always prefers to understand the issue at hand by confronting the issue either through face-to-face meetings or group discussions.

An email may be ambiguous and even ignored. The sponsor should be satisfied with the approach taken hence rejecting the request over an email would cause further disputes.

It would be unethical to hide the issue either within the project team or senior management.

Modifying the data is a misrepresentation of the issue and is unethical.

The course of action described in the scenario is a workaround. A workaround is a risk response strategy that involves taking an alternative approach to achieve the project objectives when the original plan is no longer viable. In this case, the project team discovered that the power outlet for imported equipment is not compatible with the current customer’s electrical infrastructure, which was not originally identified as a risk. To maintain the project schedule, the project manager decided to purchase a new power adapter, which is an example of a workaround.

A risk communication plan ensures stakeholders get tailored updates in a structured manner. Simply giving access or increasing reporting frequency might not align with their needs or your project constraints.

Newly identified risks should go through the standard risk management process. Qualitative risk analysis comes right after identifying the risk and helps prioritize it based on probability and impact.

When the cost of the response is greater than the impact, accepting the risk is often the best choice. This can be a passive acceptance (do nothing) or active (e.g., setting aside contingency).

Before making any major decision or updating the register, you need to assess the impact and likelihood of the new risk. Risk management follows a structured process: identify, analyze, respond, monitor.

This is a contingent response (also called a fallback plan). You’re preparing an alternate supplier to be activated only if the current supplier fails. This is not a proactive mitigation but a planned response for a specific trigger.

Identifying risk thresholds helps organizations and project teams manage risk effectively by determining what level of risk exposure is acceptable in pursuit of their objectives. This allows them to develop specific risk response strategies and drive consistency and effectiveness in risk management activities. Identifying the risk threshold is an important step in the risk management process, as it helps ensure that risks are managed in a way that aligns with the organization’s goals and objectives.

The other options are incorrect.

Risk register terminology and structure do not address the information the team is looking for and may already be standardized by the organization.

The probability and impact matrix is used for risk scoring that takes place in the subsequent qualitative risk analysis process.

The prioritization of the risks in the risk register takes place in the risk analysis processes and would not be the most effective way to determine the appropriate assessment framework.

The project manager should explore the root causes because it will help to prevent further delays and disruption caused by the emergence of new risks. This issue could have many causes and the project manager should take a proactive approach by attempting to identify gaps and address them accordingly. Exploring root causes will help reveal whether there were issues with the risk identification processes, whether there are external factors triggering the risks, or identify other contributing factors. After gaining an understanding of the root cause, the project manager can implement strategies to address them proactively for the remainder of the project. After addressing the gaps, the project manager should continuously monitor and evaluate the effectiveness of the risk management process and whether the adjustments were successful.

The project manager should evaluate the probability and impact of market volatility and develop a plan for responding to changes in financial market activity and rate variations. This will help to ensure that the project team is prepared to respond to potential risks and make informed risk response decisions. It is important for the project manager to work closely with the financial advisor and other stakeholders to develop a plan of action that addresses the potential risks and ensures the success of the project.

The other options are incorrect.

The budget has anticipated high fluctuations in exchange rates, so an extremely high variation could present a threat or an opportunity. There is no justification at this stage to pause the project. There is also no indication that market conditions will have a negative impact, they may actually present opportunities that could be exploited and increase business value. Instructing the advisor to only present delivery forecasts if they may negatively impact the project is irresponsible, ignores potential opportunities, and is not proactive or advisable.

The risk management plan outlines the process to manage risk, including risk by a change in market regulations. Reviewing the risk management plan will help to verify that the risk was identified and planned for and will ensure that the project team is prepared to respond to the potential impact of the change in market regulations. The risk management plan should include strategies for addressing risks that may impact the project, and the risk manager can use this plan to develop a plan of action for responding to the change in market regulations. If the risk management plan does not contain those details, the project team will need to develop a strategy to address the issue. The risk manager needs to ensure that all risks are managed appropriately throughout the project lifecycle to minimize their impact on the project.

In this scenario, the project manager should update the issue log as the identified risk of a fuel price increase with a low impact and high probability has now occurred with a much higher impact than anticipated. This will help the project team to track and manage the impact of the risk on the project. It is important for project managers to regularly review and update their risk management plans to ensure that they are prepared for any unexpected events that may occur during the project.

Risk identification should be an iterative process because new risks may emerge as the project progresses through its life cycle. The project manager should establish a systemic plan to iteratively engage in risk identification procedures to identify new risks as they emerge and ensure that the project team can respond to them in a timely and effective manner. This is especially crucial given the complex and uncertain nature of the project and the mandatory compliance with existing and pending regulations. The frequency of iteration and participation in each risk identification cycle should be defined in the risk management plan.

When a team member suggests adding a task that is outside of the baseline scope, the project risk manager should assess the feasibility and impact of including the task. If the task is deemed appropriate and can reduce risk to the project, it should be incorporated into future sprints. It is important to carefully consider any changes to the project scope and ensure that they align with the project goals and objectives. Incorporating new tasks into future sprints can help manage the project timeline and ensure that the project stays on track.

The project manager should provide ongoing support and coaching, engage in trust-building activities, and ensure open communications to influence team members to improve performance. This approach can help to sustain effective team communications and improve the overall performance of risk management and project delivery. It is important for the project manager to ensure that all team members understand their responsibility for managing risk and that open and honest communication is encouraged throughout the risk management process.

Risk reporting is important when monitoring risks in this scenario because it helps to ensure that the project team and stakeholders are aware of the risks and their potential impact on the project. By reporting on risks, the risk manager can provide timely and accurate information to the project team and stakeholders, which can help them make informed decisions about how to respond to the risks. Risk reporting also helps ensure that the risk management plan is being implemented effectively and that the risk responses are having the desired effect. Additionally, risk reporting can help identify any trends or patterns in the risks that are being identified, which can help the project team proactively address risks before they become issues. Overall, risk reporting is an important part of the risk management process and helps ensure that the project team and stakeholders are informed and able to make informed decisions about how to manage risks.

The other options are incorrect because they are risk responses, not tactics for monitoring risks. Risk responses are the agreed-upon response actions that are appropriate for the priority of the individual risks and the overall risk.

The risk of extreme weather was known at the start of the project and would have been evaluated and planned for accordingly. In the event of extreme weather in a remote location, the risk manager should activate the risk response plan for extreme weather that was developed during the risk management planning process. The risk response plan should be implemented to address the potential impact of extreme weather on the project. The risk manager should also update the appropriate documents to reflect the activation of the risk response plan. By implementing a well-defined risk response plan and updating the appropriate documents, the risk manager can help ensure that the project stays on track and is completed successfully.

The project manager should assess the impacts of implementing the new process. Assessment will help identify the opportunities and threats of implementing the new process. It is important to evaluate the potential benefits and risks of the new process before making a decision.

The other answer choices are incorrect. They may occur after the impact is assessed and the stakeholders are made aware.

Involving the functional manager may not be necessary at this stage. Postponing the decision is not efficient, the project manager should assess the impact first because the new process may help execute an activity with a shorter duration, which would benefit the project.

Updating the WBS is not necessary at this time because no decision has been made at this point.

The project manager should update the risk register and review risks with the team regularly to manage the risk register and the associated risks for the remaining project duration. This will help the project team to stay aware of the risks and take necessary actions to mitigate them.

In the given scenario, the funds to cover the risk mitigation should be drawn from the contingency reserve. A contingency reserve is the time or money allocated in the schedule or cost baseline for known risks with active response strategies. Since the triggered risk is a known risk that has been identified and is on the risk register, it is appropriate to use the contingency reserve to cover the cost of mitigating the risk.

The total of the Most Likely sum is US$1,050,000, which exceeds the available R&D budget of $995,000.

$650,000 (material) + $250,000 (labor) + $150,000 (travel) =$1,050,000 

The budget for R&D projects is only US$995,000, which would only be sufficient to cover the Optimistic sum of US$715,000. Starting the project with the current funding available, relying solely on the Optimistic cost projection, increases the probability of exceeding the allocated budget.
The high probability of exceeding the budget would increase risk. This corporation is risk-averse, so requesting additional funding would be the most tactful approach and would align with a risk-averse risk attitude. The corporation may even prefer to further reduce risk by securing an ample budget to cover the potential impact of the Pessimistic cost projections. Requesting additional funding provides transparency, aligns with the risk-averse approach, and allows for informed decision-making by the review board. If additional funding is not available, the corporation will need to reassess the project scope and budget to bring them in line with the available funding.
The other options are incorrect.
Beginning the project as planned with the current funding available is irresponsible, and risky, and can lead to project failure.
Hiring off-shore staff to manage the project at lower rates may not be feasible and does not necessarily adequately reduce costs. This may also introduce more risks and additional factors to consider.
Presenting only optimistic cost projections is unethical and ignores the elevated potential for risk, especially since the most likely projection exceeds the existing budget. It is important to set clear and realistic expectations for the project budget.

The stakeholder is likely basing their opinion on the fact that the impact of funding slippage is very high. The project risk manager should explain that overall risk exposure is determined and ranked by multiplying probability by impact. In this case, the probability of it occurring is very low (rated as 1) and the impact of a funding shortage is very high (rated as 5). When the probability is multiplied by the impact (1 x 5), you get a risk exposure score of 5 for the funding shortage.

Making delayed procurement the highest-ranked (15) risk in terms of overall risk exposure. The risk manager should assure the stakeholder that, even though the impact of a funding shortage is very high, its lower probability means that it is not the highest-ranked risk in terms of overall risk exposure, it is the lowest-ranked. It is important to communicate this to the stakeholder to provide a more accurate understanding of the overall risk exposure of the project.