Risk Management

Continuous risk management from conception to post-occupancy: the risk management plan, risk breakdown structure, identification, qualitative and quantitative analysis, threats and opportunities, the risk register, risk allocation, insurance, claims avoidance and dispute resolution.

5 minutes 5 Questions

Risk Management, in the context of the Certified Construction Manager (CCM) credential and the CMAA (Construction Management Association of America) body of knowledge, is the systematic process of identifying, analyzing, responding to, and monitoring risks that could affect a construction project's…

Concepts covered
Risk Identification TechniquesRisk Responses for Threats and OpportunitiesQuantitative Risk Analysis and ContingencyAlternative Dispute ResolutionClaims Avoidance and Early Claim ManagementRisk Breakdown StructureRisk Register and Risk MonitoringQualitative Probability and Impact AnalysisRisk Management Plan and the CM's RoleRisk Allocation PrinciplesProject Insurance Programs and BondsPartnering
Test mode:
Start practice test

CMAA CCM - Risk Management Example Questions

Test your knowledge of Risk Management

Question 1

On a fire station, the owner set contingency at the P80 value from a Monte Carlo cost model run at design completion. Midway through construction, foundations and underground utilities are complete. This retires the two largest risks on the tornado diagram, and $40,000 of contingency has been spent. The owner asks whether the remaining contingency balance is still the right amount. What should the construction manager do to answer this question?

Correct Answer: Rerun the simulation with retired risks removed and open risks updated, then compare its P80 to the balance

Rerunning the Monte Carlo model with the retired risks removed and the open risks re-estimated gives a fresh P80 for the remaining work. Comparing that value to the current balance shows whether contingency is excess or short.
Subtracting expected monetary values of the retired risks ignores how risks interact and how the distribution's tail shapes the P80, so the result is not a valid P80. Subtracting the $40,000 spent only reports what is left, not what is needed for the remaining risk. Releasing contingency by percent complete assumes risk is spread evenly over time, which it is not.
Key concept: probabilistic contingency should be reassessed periodically as risks are retired and updated.

Question 2

How does partnering differ from mediation, arbitration and dispute review boards as a risk management tool on construction projects?

Correct Answer: It builds team relationships to prevent disputes from arising

Partnering is a proactive, relationship-based approach in which the owner, contractor and other stakeholders commit early to shared goals, open communication and agreed issue-resolution procedures, so disputes are prevented before they arise.
Using a neutral third party to settle disputes describes mediation and arbitration, which are reactive tools applied after a conflict exists. A partnering charter is not a legally binding document and does not replace or modify the contract's claims clause. A standing review panel issuing findings on claims describes a dispute review board, not partnering.
Key concept: partnering is dispute prevention, while mediation, arbitration and dispute review boards are dispute resolution.

Question 3

During design of a wastewater pump station, the owner asks the construction manager to write the analysis methodology section of the risk management plan. The owner wants a probabilistic cost and schedule simulation run on every identified risk. The project is modest in size, historical data for many risks is thin, and the risk workshop budget is limited. Which approach should the construction manager write into the plan?

Correct Answer: Screen every risk qualitatively, then model only the top-ranked ones

Qualitative screening of all risks, followed by quantitative modeling of only the highest-ranked ones, matches analysis effort to project size, data availability and workshop budget. It still gives the owner probabilistic insight where it matters most.
Modeling every risk once the baseline schedule exists ignores the thin data and limited budget, and it wastes effort on low-impact risks. Scoring qualitatively and dropping quantitative analysis entirely gives up useful probabilistic information on the critical risks. Handing all modeling to the contractor shifts an owner-side planning duty to another party and still models every risk.
Key concept: a tiered risk analysis approach that scales the analysis method to project complexity and data quality.

More Risk Management questions
455 questions (total)
Practice 100 questions
One session at a time, always new questions