You are the project manager of a project in Bluewell Inc.
You and your project team have identified several project risks, completed risk analysis, and are planning to apply most appropriate risk responses.
Which of the following tools would you use to choose the appropriate risk response?
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A. B. C. D.C.
Decision tree analysis is a risk analysis tool that can help the project manager in determining the best risk response.
The tool can be used to measure probability, impact, and risk exposure and how the selected risk response can affect the probability and/or impact of the selected risk event.
It helps to form a balanced image of the risks and opportunities connected with each possible course of action.
This makes them mostly useful for choosing between different strategies, projects, or investment opportunities particularly when the resources are limited.
A decision tree is a decision support tool that uses a tree-like graph or model of decisions and their possible consequences, including chance event outcomes, resource costs, and utility.
Incorrect Answers: A: Project network diagrams help the project manager and stakeholders visualize the flow of the project work, but they are not used as a part of risk response planning.
B: Cause-and-effect analysis is used for exposing risk factors and not an effective one in risk response planning.
This analysis involves the use of predictive or diagnostic analytical tool for exploring the root causes or factors that contribute to positive or negative effects or outcomes.
D: Delphi technique is used for risk analysis, i.e., for identifying the most probable risks.
Delphi is a group of experts who used to rate independently the business risk of an organization.
Each expert analyzes the risk independently and then prioritizes the risk, and the result is combined into a consensus.
C. Decision tree analysis is the tool that project managers would use to choose the appropriate risk response from the identified risks.
Decision tree analysis is a tool used in risk management to evaluate and choose the best course of action in a situation where multiple options are available, and the outcomes of each choice are uncertain. It involves mapping out all the possible outcomes of a decision and assessing the likelihood and consequences of each outcome.
To use decision tree analysis, the project manager would first list all possible risk response options and the corresponding outcomes. Then, they would estimate the likelihood of each outcome and its potential impact on the project. Once the probability and impact have been assessed, the project manager would calculate the expected value for each risk response option.
Expected value is the average outcome of a decision, weighted by its probability. It is calculated by multiplying the probability of each outcome by its associated impact and summing the products.
After calculating the expected value for each risk response option, the project manager would choose the one with the highest expected value as the most appropriate risk response. The decision tree analysis helps project managers make informed decisions based on the available information, and it provides a framework for evaluating the potential risks and rewards of each option.
In contrast, project network diagrams, cause-and-effect analysis, and Delphi technique are tools used for different purposes in project management. Project network diagrams are used to visualize the project schedule, identify critical path activities, and estimate project completion dates. Cause-and-effect analysis is used to identify and analyze the root causes of a problem or risk. The Delphi technique is a structured method used to reach a consensus among a group of experts on a particular topic.