You are the project manager of the KJH Project and are working with your project team to plan the risk responses.
Consider that your project has a budget of $500,000 and is expected to last six months.
Within the KJH Project you have identified a risk event that has a probability of .70 and has a cost impact of $350,000
When it comes to creating a risk response for this event what is the risk exposure of the event that must be considered for the cost of the risk response?
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A. B. C. D.D.
The risk exposure for this event is found by multiplying the risk impact by the risk probability.
Risk Exposure is a straightforward estimate that gives a numeric value to a risk, enabling different risks to be compared.
Risk Exposure of any given risk = Probability of risk occurring x impact of risk event = 0.70 * 350,000 = 245,000 Incorrect Answers: A: $350,000 is the impact of the risk event.
B: $500,000 is the project's budget.
C: $850,000 is the project's budget and the risk's impact.
The risk exposure of an event is defined as the product of the probability of the risk event and the potential impact of the risk event. In this case, the risk event has a probability of .70 and a cost impact of $350,000.
Risk Exposure = Probability x Impact
Risk Exposure = 0.70 x $350,000
Risk Exposure = $245,000
Therefore, the risk exposure of the event is $245,000.
Now, when it comes to creating a risk response for this event, the project team must consider the cost of the risk response in relation to the risk exposure.
For example, if the cost of implementing a risk response is $100,000, then the project team must evaluate whether the cost of the risk response is justified based on the risk exposure. In this case, the cost of the risk response must not exceed the risk exposure, otherwise it would not be a cost-effective decision for the project.
It is important to note that the project budget and duration should also be taken into consideration when evaluating the cost-effectiveness of a risk response. In this case, the project has a budget of $500,000 and is expected to last six months. The project team should consider whether the cost of the risk response is within the project budget and whether the duration of the risk response will impact the overall project timeline.