Information technology project management 4th edition marchewka test bank

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Information Technology Project Management 4e - Marchewka

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. a. True b. False True 2. The best time to plan for risk is during the project execution phase when risk can be assessed most accurately. a. True b. False False 3. Effective project risk management requires that each risk have an owner. a. True b. False True 4. In general, because of the similarities in IT projects, one can manage all projects and risks in the same manner. a. True b. False False 5. Project risk management focuses solely on the downside of risk that results from unexpected problems or threats. a. True b. False False 6. The PMBOK® definition of project risk suggests that a systematic process is needed to effectively manage the risk of a project. a. True b. False True 7. It never pays to ignore an element of project risk. a. True b. False False

Information Technology Project Management 4e - Marchewka

8. The goal of a sound risk management is to completely avoid all risk. a. True b. False False 9. Triggers or flags in the form of metrics should be identified to draw attention to a particular risk when it occurs. a. True b. False True 10. Unknown-unknown risks are residual risks that we cannot even imagine happening. a. True b. False True 11. Since risk arises from uncertainty, there can be no such category as known risks. a. True b. False False 12. Learning cycles can be used as a tool for identifying threats and opportunities. a. True b. False True 13. Nominal Group Technique is a free form, unstructured process similar to Brainstorming. a. True b. False False 14. The fishbone or Ishikawa diagram is a form of cause and effect analysis diagramming. a. True b. False True 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. a. True

Information Technology Project Management 4e - Marchewka b. False

False 16. Qualitative risk analysis has as one of its strengths the ability to include subjective analysis based on experience and judgment. a. True b. False True 17. The concept of expected value rests on the notion of a probability-weighted summation of component parts. a. True b. False True 18. 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. a. True b. False False 19. 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. a. True b. False False 20. The deployment of a specific risk management strategy is in part a function of risk tolerance levels of the stakeholders. a. True b. False True

Information Technology Project Management 4e - Marchewka Multiple Choice 1.

The IT Project Risk Management Processes include all of the following except: a) Plan Risk Management b) Identify Risks c) Risk Elimination d) Perform Qualitative Risk Analysis e) Monitor and Control Risks

Answer: C (p. 207) 2.

Successful risk management requires _____ a) misunderstanding the benefits of risk management b) inadequate time for risk identification c) use of a non-standard approach to assess risk d) stakeholder responsibility e) occasional monitoring of risks to ensure compliance

Answer: D (p. 207) 3.

_____ involves development of a risk management plan. a) Plan Risk Management b) Identify Risks c) Perform Quantitative Risk Analysis d) Plan Risk Responses e) Monitor and Control Risks

Answer: A (p. 207) 4.

_____ involves deciding which risks can impact the project. a) Plan Risk Management b) Identify Risks c) Perform Quantitative Risk Analysis d) Plan Risk Responses e) Monitor and Control Risks

Answer: B (p. 207)

Information Technology Project Management 4e - Marchewka

5.

_____ involves developing a probabilistic model for understanding and responding to identified risks. a) Plan Risk Management b) Identify Risks c) Perform Quantitative Risk Analysis d) Plan Risk Responses e) Monitor and Control Risks

Answer: C (p. 207) 6.

_____ involves developing procedures and techniques to reduce the threat of risks and enhance the likelihood of opportunities. a) Plan Risk Management b) Identify Risks c) Perform Qualitative Risk Analysis d) Plan Risk Responses e) Monitor and Control Risks

Answer: D (p. 207) 7.

_____ provides an early warning system to monitor identified risks and any new risks. a) Plan Risk Management b) Identify Risks c) Perform Qualitative Risk Analysis d) Plan Risk Responses e) Monitor and Control Risks

Answer: E (p. 207) 8.

_____ is an uncertain event that, if it occurs, has a positive or negative effect on project objectives. a) Risk management b) Risk response c) Project risk d) Risk plan e) Risk control

Information Technology Project Management 4e - Marchewka Answer: C (p. 207) 9.

_____ are the processes of conducting risk management planning, identification, analysis, response planning, and monitoring and control on a project. a) Project risk management b) Project risk response c) Project risk planning d) Project risk analysis e) Project risk control

Answer: A (p. 209) 10.

The first step in managing IT project risk is _____. a) risk identification b) risk assessment c) risk planning d) risk monitoring and control e) risk evaluation

Answer: C (p. 209) 11.

_____requires determining the true problem, or cause, of the risk. a) risk identification b) risk assessment c) risk planning d) risk monitoring and control e) risk evaluation

Answer: A (p. 210) 12.

_____involves determining the likelihood and project impact of a risk. a) risk identification b) risk assessment c) risk planning d) risk monitoring and control e) risk evaluation

Information Technology Project Management 4e - Marchewka Answer: B (p. 210) 13.

_____determines how to deal with the occurrence of a risk. a) risk identification b) risk assessment c) risk planning d) risk monitoring and control e) risk strategies

Answer: E (p. 210) 14.

Risks may be positive or negative. For a positive risk, a project manager would want to _____. a) accept the risk b) share ownership c) avoid the risk d) reduce the impact of the risk e) transfer the risk

Answer: B (p. 210) 15.

Through _____, the project manager will scan the project environment to watch for risks as they may arise. a) risk identification b) risk assessment c) risk planning d) risk monitoring and control e) risk strategies

Answer: D (p. 211) 16.

Once a risk is made known, _____ will execute the planned risk strategy. a) risk identification b) risk assessment c) risk planning d) risk response e) risk strategies

Information Technology Project Management 4e - Marchewka Answer: D (p. 211) 17.

_____ is an interim lessons learned to determine how the risk was handled. a) risk identification b) risk assessment c) risk planning d) risk response e) risk evaluation

Answer: E (p. 211) 18.

_____ is the core layer in the IT Project Risk Identification Framework. a) Measurable Organizational Value b) Project objectives c) Risk sources d) Internality / Externality e) Known / Unknown

Answer: A (p. 212) 19.

Identifying what you know, what you think you know, and things you need to find out would be activities most closely associated with: a) Learning Cycles b) Brainstorming c) Nominal Group Technique d) Delphi Technique e) Cause-and-Effect Diagrams

Answer: A (p. 215) 20.

Gaining consensus from a group of experts would be most closely associated with: a) Learning Cycles b) Brainstorming c) Nominal Group Technique d) Delphi Technique e) Cause-and-Effect Diagrams

Information Technology Project Management 4e - Marchewka Answer: D (p. 216) 21.

Initial generation of ideas without evaluation would be most closely associated with: a) Learning Cycles b) Brainstorming c) Nominal Group Technique d) Delphi Technique e) Cause-and-Effect Diagrams

Answer: B (p. 215) 22.

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) Delphi Technique e) Cause-and-Effect Diagrams

Answer: C (p. 216) 23.

A _____ is a structured tool that identifies risks that have occurred in the past. a) learning cycle b) brainstorming session c) Nominal Group Technique d) Delphi Technique e) checklist

Answer: E (p. 216) 24.

A _____ identifies threats and opportunities in the external environment as well as organizational strengths and weaknesses . a) Learning Cycle b) SWOT Analysis c) Nominal Group Technique d) Delphi Technique

Information Technology Project Management 4e - Marchewka e) Checklist Answer: B (p. 216) 25.

_____ focuses on root-cause analysis and determining the cause of risks, as well as the effects of risks on the project. a) Learning Cycles b) Brainstorming c) Nominal Group Technique d) Delphi Technique e) Cause-and-Effect Diagrams

Answer: E (p. 217) 26.

_____ determines each identified risk’s probability of occurrence and impact on the project. a) Risk mitigation b) Risk assessment c) Risk avoidance d) Risk analysis e) Risk monitoring and control

Answer: D (p. 217) 27.

_____ prioritizes risks so that an effective risk strategy can be formulated. a) Risk mitigation b) Risk assessment c) Risk avoidance d) Risk analysis e) Risk monitoring and control

Answer: B (p. 217) 28.

The Payoff Table would be used with which risk assessment technique ? a) Qualitative Risk Analysis b) Quantitative Risk Analysis c) Cause-and- Effect Diagram d) Simulations e) Probability Distributions

Information Technology Project Management 4e - Marchewka

Answer: A (p. 218) 29.

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

Answer: A (p. 210) 30.

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

Answer: B (p. 213) 31.

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

Answer: C (p. 224) 32.

_____ use only integer or whole numbers, where fractional values are not allowed or would not make sense. a) Discrete Distribution b) Normal Distribution

Information Technology Project Management 4e - Marchewka c) Pert Distribution d) Triangular Distribution e) Binomial Distribution Answer: A (p. 224) 33.

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

Answer: D (p. 224) 34.

_____ randomly generates specific values for a variable with a specific probability distribution. a) Discrete Distribution b) Normal Distribution c) Pert Distribution d) Monte Carlo Simulation e) Binomial Distribution

Answer: D (p. 225) 35.

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%

Answer: C (p. 223) 36.

In a normal distribution we would expect to find _______ of all values with in + or - 2 standard deviation.

Information Technology Project Management 4e - Marchewka

a) 13% b) 34% c) 68% d) 95% e) 99% Answer: D (p. 223) 37.

Reserves and contingency plans would be used in which risk strategy ? a) accept or ignore b) avoidance c) mitigation d) transfer e) none of the above

Answer: A (p. 229)

Information Technology Project Management 4e - Marchewka Short Answer Questions 1. What is meant by crisis management? And why do many organizations find themselves in this mode?

Because of their failure to plan for the unexpected, many organizations find themselves in a state of perpetual crisis characterized by an inability to make effective and timely decisions. Many people call this approach crisis management or fire fighting because the project stakeholders take a reactive approach or only address the project risks after they have become problems.

2. What is project risk?

PMBOK® defines project risk as: An uncertain event or condition that, if it occurs, has a positive or negative effect on the project objectives.

3. What is project risk management?

PMBOK® defines project risk management as: The systematic process of identifying, analyzing, and responding to project risk. It includes maximizing the probability and consequences of positive events and minimizing the probability and consequences of adverse events.

4. What are the seven IT project risk management processes?

• Risk Planning • Risk Identification • Risk Assessment • Risk Strategies • Risk Monitoring and Control • Risk Response • Risk Evaluation 5. Why can identifying IT project risks be difficult?

Risk identification can be difficult because many risks can affect a project in different ways and during different phases of the project life cycle. At times it is not possible to distinguish between internal and external risks. Finally, when attempting to address the future, there exists a category of risks (unknownunknown) that by definition are unknowable a priori.

6. Describe how learning cycles can be used to identify IT project risks.

The project team and stakeholders can use this technique, whereby they identify facts (what they know), assumptions (what they think they know), and research (things to find out), to identify various risks. Using these three categories, the group can create an action plan to test assumptions and conduct research about various risks. Based on the team’s findings, both risks and lessons learned can then be documented.

Information Technology Project Management 4e - Marchewka 7. What is the Delphi Technique? How can this technique be used to identify IT project risks?

A group of experts are asked to identify potential risks or discuss the impact of a particular risk. Initially, in order to reduce the potential for bias, the experts are not known to each other. Their responses are collected and made available anonymously to each other. The experts are then asked to provide another response based upon the previous round of responses. The process continues until a consensus exists. The advantage of using the Delphi technique is the potential for getting an insightful view into a threat or opportunity; but the process takes time and may consume a good portion of the project’s resources.

8. What is SWOT analysis? How can this technique be used to identify IT project risks?

SWOT stands for Strengths, Weaknesses, Opportunities, and Threats. Brainstorming, NGT, or the Delphi technique could be used to identify and understand the nature of IT project risks by categorizing risks using the four-part framework. The usefulness of using SWOT analysis is that it allows the project team to identify threats and opportunities as well as their nature in terms of project or organizational strengths and weaknesses.

9. What is a fishbone (Ishikawa) diagram? How can this tool be used to identify IT project risks?

The fishbone, or Ishikawa, diagram developed by Kaoru Ishikawa was developed to analyze the causes of poor quality in manufacturing systems. The diagram can also be used for understanding the causes or factors of a particular risk, as well as its effects. An example of an Ishikawa diagram is illustrated in Figure 8.4. The diagram shows the possible causes and effects of a key member of the team leaving the project. This technique itself can be used individually or in groups by using the following steps: a. Identify the risk in terms of a threat or opportunity. b. Identify the main factors that can cause the risk to occur. c. Identify detailed factors for each of the main factors. d. Continue refining the diagram until satisfied that the diagram is complete.

10. What is the purpose of a risk impact table?

The purpose of a risk impact table is to analyze and prioritize various IT project risks. It provides a mechanism for determining which risks should be monitored and which risks may require a response.

11. What is a Monte Carlo simulation? Describe a situation (other than the one used in this chapter) that could make good use of a Monte Carlo simulation.

Monte Carlo simulation is a technique that randomly generates specific values for a variable with a specific probability distribution. The simulation goes through a specific number of iterations or trials and records the outcome. We can perform simulations using almost any continuous or discrete probability distribution. If one

Information Technology Project Management 4e - Marchewka was attempting to develop a budget in the face of uncertain factor input prices, a Monte Carlo simulation could be conducted that would make random picks from probability distributions that reflect ones estimation of the true underlying population parameters. One then might run a thousand simulated picks generating one thousand budget estimates which could then be averaged to calculate the expected budget costs.

12. Define and discuss the four risk strategies described in this chapter.

• Accept or Ignore—Choosing to accept or ignore a particular risk is a more passive approach to risk response. The project stakeholders can either be hopeful that the risk will not occur or just not worry about it unless it does. This can make sense for risks that have a low probability of occurring or a low impact. However, reserves and contingency plans can be active approaches for risks that may have a low probability of occurring but with a high impact.

• Avoidance—The avoidance strategy focuses on taking steps to avoid the risk altogether. In this case, an active approach is made to eliminate or prevent the possibility of the threat occurring.

• Mitigate—The term mitigate means to lessen. Therefore, a mitigation risk strategy focuses on lessening the probability and/or the impact of threat if it does occur.

• Transfer—A transfer strategy focuses on transferring ownership of the risk to someone else. This transfer could be in the form of purchasing insurance against a particular risk or subcontracting a portion of the project work to someone who may have more knowledge or expertise in the particular area. As a result, this strategy may result in a premium, or added cost, to managing and responding to the risk.

13. What is a contingency plan?

Contingency plans—Sometimes called an alternative plan, or Plan B, this plan can be initiated in the event a particular risk occurs. Although these types of plans are viewed as plans of last resort, they can be useful in a variety of ways.

14. What is a risk response plan? What should be included?

Once the project risks and strategies are identified, they can be documented as part of the risk response plan. This plan should include the following: • The project risk • The trigger which flags that the risk has occurred • The owner of the risk (i.e., the person or group responsible for monitoring the risk and ensuring that the appropriate risk response is carried out) • The risk response based on one of the four basic risk strategies 15. What is risk monitoring and control?

Once the risk response plan is created, the various risk triggers must be continually monitored to keep track of the various IT project risks. In addition, new threats and

Information Technology Project Management 4e - Marchewka opportunities may present themselves over the course of the project, so it is important that the project stakeholders be vigilant. Risk monitoring and control should be part of the overall monitoring and control of the project. Monitoring and control focus on metrics to help identify when a risk occurs, and also on communication. (p. 203)

Information Technology Project Management 4e - Marchewka 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.

Briefly describe the seven IT Project Risk Management processes.

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.

How is a Monte Carlo simulation conducted?

8.

What factors determine the appropriate risk strategy to deploy?

9. The text discusses four main risk response strategies. Briefly describe them and the implications of choosing one over another.

10. Describe some of the tools that are typically employed to monitor and control risk.