PMI-RMP Exam Dumps - PMI Risk Management Professional (PMI-RMP) Exam

Contingency plans are predefined actions that the project team will take if an identified risk event occurs. They are designed to reduce the impact or probability of the risk, or to restore the project to its original objectives. Contingency plans are part of the risk response planning process, and they should be documented in the risk register. In this case, the risk manager should execute the contingency plans to deal with the delays caused by the weather, as they cannot be avoided or mitigated. Performing time recovery actions, executing prevention plans, or performing change management are not appropriate responses for this risk, as they are either reactive, proactive, or corrective measures that do not address the risk directly. References: = PMBOK Guide, 6th edition, page 443; The Standard for Risk Management in Portfolios, Programs, and Projects, page 75.

 The project manager should proceed with the planned risk response to move the equipment, as this is the best way to deal with the weather-related risk that was identified and recorded in the risk register. A risk register is a document that lists all the identified risks, their causes, impacts, probabilities, and responses for a project1. A risk response is a strategy or action that is taken to reduce the negative effects or enhance the positive effects of a risk event2. A risk response should be planned and executed according to the risk management plan, which is a document that describes how risk management activities will be structured and performed on a project3. The risk management plan should also define the roles and responsibilities, risk categories, risk appetite and thresholds, risk identification and analysis methods, risk response strategies, risk monitoring and reporting mechanisms, and risk governance mechanisms3. Therefore, the project manager should follow the risk management plan and the risk register to implement the planned risk response to move the equipment, as this is the most effective and efficient way to manage the risk and meet the project objectives. Waiting until the weather improves before sending the equipment, asking the project sponsor to approve shipping the equipment, or requesting the shipment of the equipment to satisfy the client are not the best options to deal with the weather-related risk. Waiting until the weather improves may cause further delays and increase the cost and scope of the project, as well as damage the relationship with the client. Asking the project sponsor to approve shipping the equipment may not be necessary or feasible, as the project sponsor may not have the authority or the availability to make such a decision. Requesting the shipment of the equipment to satisfy the client may not be realistic or safe, as the bad weather may pose a threat to the quality and integrity of the equipment, as well as the health and safety of the people involved in the transportation. These options may also deviate from the risk management plan and the risk register, which may create confusion and inconsistency in the risk management process. References: 1, 2, 3.

To determine whether to purchase the new component, we can perform an Expected Monetary Value (EMV) analysis for both scenarios: purchasing the component and not purchasing it.

1. Purchasing the New Component:

Probability of Success: 70% (0.7)

Profit if Successful: US$500,000

EMV of Success: 0.7 * $500,000 = $350,000

Probability of Failure: 30% (0.3)

Additional Cost if Failed: US$50,000

EMV of Failure: 0.3 * (-$50,000) = -$15,000

Cost of Component: -$100,000

Total EMV: $350,000 (success) - $15,000 (failure) - $100,000 (cost) = $235,000

2. Not Purchasing the New Component:

Probability of Failure: 80% (0.8)

Cost if Failed: US$250,000

EMV of Failure: 0.8 * (-$250,000) = -$200,000

Probability of Success: 20% (0.2)

Profit if Successful: US$0 (assuming no additional profit without the component)

EMV of Success: 0.2 * $0 = $0

Total EMV: $0 (success) - $200,000 (failure) = -$200,000

Comparing the two scenarios, purchasing the new component yields a positive EMV of $235,000, whereas not purchasing it results in a negative EMV of -$200,000. Therefore, from a risk management perspective, it is advisable to purchase the new component.

PMI Risk Management Study Guide References:

The PMI-RMP Exam Preparation Study Guide discusses the application of Expected Monetary Value (EMV) analysis in decision-making under uncertainty, providing a structured approach to evaluate potential financial outcomes.

The risk management plan provides guidance on how often the risk register should be updated or reviewed. It takes into account the specific industry, project, and organizational context, including the business rhythm.

When a project involves equipment provided by the customer, the risk of delayed delivery is significant, as it can have a high impact on the project timeline. The risk manager should ensure that this risk is well-documented in the risk register and managed as a high-impact project risk. By doing so, the project team can monitor the situation closely and implement contingency plans if necessary. This approach is consistent with PMI’s guidelines on risk management, which emphasize the importance of identifying, documenting, and managing high-impact risks to mitigate their effects on project objectives​​.

 

 

The overall goal of selecting strategies during the Plan Risk Response activity is to choose those strategies that have the greatest overall positive influence on the project, considering factors such as cost, schedule, and resources.

According to the PMI Risk Management Professional (PMI-RMP)® Examination Content Outline1, one of the tasks in the domain of Risk Response is to select risk response strategies based on the risk appetite and tolerance of the organization and stakeholders1. The overall goal of selecting risk response strategies is to select the strategies with the greatest overall positive influence on the project objectives, such as scope, schedule, cost, quality, etc. The risk response strategies should aim to enhance the opportunities and reduce the threats to the project, while considering the cost-benefit analysis, the feasibility, and the alignment with the project goals and stakeholder expectations2. The risk response strategies should not be selected based on the least overall impact to resources, because that may not be the most effective or efficient way to address the risks, and it may ignore the potential benefits of some strategies that may require more resources but also deliver more value3. The risk response strategies should not be selected based on the least financial impact, because that may not be the most relevant or comprehensive criterion to evaluate the risks, and it may overlook other aspects of the project, such as quality, customer satisfaction, reputation, etc. that may also be affected by the risks4. The risk response strategies should not be selected based on the greatest benefit to stakeholders, because that may not be the most realistic or achievable goal, and it may create conflicts or trade-offs among different stakeholder groups that may have different or competing interests, needs, and expectations5. References: 1: PMI Risk Management Professional (PMI-RMP)® Examination Content Outline, page 102: A Guide to the Project Management Body of Knowledge (PMBOK® Guide) – Sixth Edition, page 4403: A Guide to the Project Management Body of Knowledge (PMBOK® Guide) – Sixth Edition, page 4414: A Guide to the Project Management Body of Knowledge (PMBOK® Guide) – Sixth Edition, page 4425: A Guide to the Project Management Body of Knowledge (PMBOK® Guide) – Sixth Edition, page 518.

The project manager should discuss the risk response strategies with the stakeholders to handle their expectations. This will help the project manager to align the risk responses with the stakeholder’s risk appetite, preferences, and expectations. It will also help the project manager to obtain the stakeholder’s support and approval for the risk responses. This is the best way to ensure clear visibility on the project risks and progress. Adding buffers to the schedule to accommodate risk (option A) is not a good practice, as it may create false expectations and hide the true impact of risk. Ensuring the risk register includes all identified risks (option B) is important, but it is not enough to handle stakeholder expectations. The project manager also needs to communicate the risk register to the stakeholders and discuss the risk responses with them. Developing a communication plan to share updates on risks (option D) is also a good practice, but it is not sufficient to handle stakeholder expectations. The project manager also needs to involve the stakeholders in the risk response planning process and obtain their feedback and approval. References: PMI, The Standard for Risk Management in Portfolios, Programs, and Projects, 2019, p. 97; PMI, A Guide to the Project Management Body of Knowledge (PMBOK® Guide), 6th ed., 2017, p. 407.

The project manager should develop a communication plan to share updates on risks (D) to handle stakeholder expectations, especially since the organization has a low risk appetite and stakeholders are very engaged. This approach ensures that stakeholders are regularly informed about the project's risks and progress, addressing their concerns and expectations. This is supported by the PMI's PMBOK Guide, Sixth Edition.

In qualitative risk analysis, in addition to probability and impact, other factors can be used to refine the risk prioritization. Three valid factors to consider are:

1. Urgency: This refers to the timeframe within which a risk is likely to occur or the speed at which it might impact the project. High urgency risks require quicker responses, making them more critical in prioritization.

2. Proximity: This factor considers the time until the risk might affect the project. Risks that are likely to occur sooner may be given higher priority because they may require immediate attention.

3. Detectability: This assesses how easily the presence or impact of a risk can be identified. Risks that are hard to detect might be more dangerous and may require more resources to monitor and manage.

These factors are mentioned in PMI's guidelines for qualitative risk analysis as they provide a more nuanced view of risks beyond just probability and impact, allowing for more targeted and effective risk management strategies​.