Back to Certified Associate in Project Management (CAPM)

Risk Identification and Assessment

Identifying and assessing project risks

Risk identification and assessment is the process of determining risks that could potentially prevent the program from achieving its objectives, assessing those risks and reacting to provide the highest possible chance of success.
5 minutes 5 Questions

Risk Identification and Assessment are crucial processes in project management under the CAPM framework. Risk Identification involves systematically determining which risks might affect the project and documenting their characteristics. This process draws upon historical information, expert judgmen…

Concepts covered: Expected Monetary Value Analysis, Risk Categorization, Risk Monitoring and Control, Risk Probability and Impact Assessment, Risk Response Planning, Qualitative Risk Assessment, Risk Identification, Quantitative Risk Assessment, Risk Register Development, Risk Urgency Assessment

Test mode:
Start practice test
CAPM - Risk Identification and Assessment Example Questions

Test your knowledge of Risk Identification and Assessment

Question 1

While managing an infrastructure project, you identify a financial risk related to the fluctuating cost of raw materials. Under what category does this risk type fall?

Correct Answer: Financial Risk

The fluctuation in the cost of raw materials directly impacts the finances of a project and hence, this is a Financial Risk. Operational Risk typically involves failure in the processes, systems, or people involved in a project. External Risk includes factors that are beyond the control of the project organization such as regulatory changes or natural disasters. Project Management Risk is related to potential failures in planning, organizing, directing, or controlling the project but does not directly relate to the cost of raw materials.

Question 2

You are managing an IT project. The server costs are $100,000, and there is a 0.4 probability it might crash in the next 6 months. What is the contingency reserve for the server?

Correct Answer: $40,000

The contingency reserve for the server is calculated by multiplying the server cost by the probability of it crashing. The server cost is $100,000 and the probability of it crashing is 0.4, so the contingency reserve is $100,000 multiplied by 0.4, which equals $40,000. The answers '$25,000', '$100,000', and '$75,000' are incorrect because they do not reflect this calculation.

Question 3

You are managing a construction project with a budget of $500,000. There is a 20% chance that a certain risk might occur, in which case the project would exceed the budget by $100,000. What is the expected monetary value (EMV) of this risk?

Correct Answer: $20,000

The expected monetary value (EMV) of a risk is calculated by multiplying the cost of the risk by the probability of the risk. In this case, the risk would cost $100,000 if it happened - this is the impact of the risk. However, the risk is not certain. There is only a 20% chance it will occur - this is the probability of the risk. So the EMV is calculated as $100,000 (the impact of the risk) multiplied by 0.20 (the probability of the risk), which gives $20,000. The other answers are incorrect: $600,000 is the total budget with the cost of the risk (not the EMV), $400,000 is less than the budget (and doesn't take the risk into account), and $500,000 is the initial budget (and also doesn't consider the risk).

More Risk Identification and Assessment questions
107 questions (total)
Start 100 question test