Test 3 - PMGT 3640 - Planning and Managing Project Risk

Vocabulary flashcards covering the definitions, categories, and management processes for project risk based on the PMGT 3640 Module 3 lecture notes.

Risk (Uncertainty degree)

Associated with not knowing future events.

Ambiguity

Associated with not being aware of current or future conditions.

Complexities

Associated with dynamic systems having unpredictable outcomes.

Volatility

Associated with rapid and unpredictable change.

Project risk

An uncertain event or condition that, if it occurs, has a positive or negative effect on one or more project objectives such as scope, schedule, cost, procurement and quality.

Opportunity

A positive risk that can make it easier to achieve a project’s objectives.

Threat (Negative risk)

Potential hazards to the project, such as the potential for technology to fail or a vendor missing an important delivery.

Individual risk

Specific events or conditions that might affect project objectives, elements or task.

Overall project risk

Considers the effect of uncertainty on the project as a whole and represents the exposure to the effects of uncertainty across the project rather than individual elements.

Issues

Known potential problems that the project team will definitely have to keep an eye on.

Known risk

Risks that can be identified, analyzed and planned in advance.

Unknown risk

Risks that the project team is unable to anticipate and describe.

Residual risk

The risk that remains after considering the mitigating effects of all options to reduce risk.

Tolerable risk

The level of risk people are willing to accept to secure and enjoy certain benefits.

Risk capacity

The maximum amount of risk an organization can bear.

Risk appetite

The maximum amount of risk an organization is willing to assume.

Risk Breakdown Structure (RBS)

A hierarchical structure that enables risk categories to be more easily remembered; it can follow the deliverables of the work breakdown structure (WBS).

Qualitative Risk Assessment

A quick and subjective process that prioritizes identified project risks using a pre-defined rating scale (such as high, medium, low) to estimate likelihood and impact.

Quantitative Risk Assessment

A numeric estimate of the overall effect of risk on project objectives, providing insights for developing contingency reserves.

Monte Carlo simulation

A statistical model that simulates a possible range of outcomes by evaluating many combinations of risks based on their likelihood.

Risk avoidance

Developing an alternative strategy with a higher probability of success by evading the risk, such as using proven technologies instead of new ones.

Risk mitigation

A response that attempts to reduce the likelihood and impact of a risk, such as assigning highly skilled resources to an activity.

Risk transfer

A method that shifts the risk from the project to another party, often by purchasing insurance.

Risk acceptance

A strategy involving doing nothing in response to a risk, typically used when the likelihood and impact are low; it often involves setting aside contingency reserves.

Risk sharing

Partnering with another company to share responsibility for an opportunity, increasing the likelihood of it materializing.

Risk exploitation

A positive risk response that attempts to eliminate uncertainty to ensure the occurrence of an opportunity.

Risk enhancement

A response that attempts to increase the probability of an opportunity materializing without seeking to ensure its occurrence.

Risk Register

A key tool that helps project teams track the status of risks, ensure response plans are implemented, and manage new risks throughout the project life.

Contingency funds

Funds set aside by the project team to address unforeseen events that cause an increase in project costs.

Cumulative schedule risk (thresholds)

Considered high risk if it is above $25\%$ and low if it is below $15\%$.

Cost risk (thresholds)

Considered high risk if it is more than $10\%$ and low if it is below $5\%$ of the total cost of the project.

Threat factor

A qualitative calculation of the level of risk within a project that calculates the average risk ruthlessness for the highest $20$ threats.

Risk framework

A document that outlines an organization's risk management approach, risk appetite, risk tolerance, and accountabilities and responsibilities.