Risk Tolerance in Project Management
Question
Scenario - A photographer from Portraits Ltd, a professional photographic company, has taken on the role of Team Manager after taking some time to understand the requirements of the project.
A contract for their services has been set up and is being monitored by the Purchasing Manager and a Work Package has been agreed.
This contract specifies that the photographer must arrange a meeting with the Engineering Manager to establish a schedule for the photo sessions to minimize the impact on the Engineering staff.
This meeting should have occurred by now.
The Engineering Manager was made aware of this requirement but when asked he reported that he has received no communication from the photographer.
The Project Manager has tried to call the photographer and has had no response.
The Project Manager believes there is a risk that Portraits Ltd are overbooking work and prioritizing other clients' work.
If Portraits ltd do not deliver on schedule the project will be delayed and the expected benefits will be reduced.
The contract is to be reviewed and Portraits Ltd reminded of their agreement.
The project is now in stage 2
The Project Manager has heard about the possibility of a competitor also producing a calendar to be delivered earlier than the target date for this project.
There is a threat that the early release of a competitor's calendar may weaken the impact of the MNO Manufacturing Company calendar, thereby reducing the anticipated benefits of the Calendar project.
Which 2 statements should be recorded under the Risk tolerance heading?
Answers
Explanations
Click on the arrows to vote for the correct answer
A. B. C. D. E.BD.
Risk tolerance is the degree of risk that an organization is willing to accept or tolerate in pursuit of its objectives. It is important to define risk tolerance in a project to ensure that risks are managed effectively and within the acceptable limits of the organization. The correct statements that should be recorded under the Risk tolerance heading in this scenario are:
B. The Project Board's threshold level of risk exposure is any combination of medium, high and very high impact, with high and very high probability.
C. The Project Manager's threshold level of risk exposure is low impact and probability.
Explanation:
A. Corporate management's threshold level of risk exposure is any combination of high and very high impact and probability.
This statement is not relevant to the scenario provided. While it is important for an organization to define its risk tolerance, the scenario does not provide any information on the corporate management's threshold level of risk exposure.
B. The Project Board's threshold level of risk exposure is any combination of medium, high and very high impact, with high and very high probability.
This statement is relevant to the scenario provided. The Project Board is responsible for setting the project's risk tolerance level, and in this case, they are willing to accept risks with medium, high, and very high impacts as long as the probability of those risks occurring is also high or very high. This statement indicates that the project has a relatively high tolerance for risks with potentially significant impacts.
C. The Project Manager's threshold level of risk exposure is low impact and probability.
This statement is also relevant to the scenario provided. The Project Manager's threshold level of risk exposure indicates that they are only willing to accept risks with low impacts and probabilities. This statement suggests that the Project Manager is risk-averse and prefers to take a cautious approach to risk management.
D. The cost of all fallback plans must be contained within the project's tolerance.
This statement is not relevant to the scenario provided. While it is important to consider the cost of fallback plans, the scenario does not provide any information on the project's tolerance for those costs.
E. The risk budget will have a tolerance of +/~ 10%.
This statement is not relevant to the scenario provided. While it is important to define the risk budget, the scenario does not provide any information on the project's tolerance for fluctuations in that budget.
In summary, the statements that should be recorded under the Risk tolerance heading in this scenario are B and C. The Project Board is willing to accept risks with medium, high, and very high impacts as long as the probability of those risks occurring is also high or very high, while the Project Manager prefers to take a cautious approach to risk management and is only willing to accept risks with low impacts and probabilities.
