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1) The sponsor will not accept a risk or the schedule being delayed by 20 working days or longer. This is an example of ?

  1. risk tolerance
  2. risk acceptance
  3. risk aversion
  4. risk threshold

can anyone answer this question? (source: www.pmgurus.com)

2) Your company is a multinational and has many offices in different locations. You have signed a multi-billion contract with one of the leading companies which has several offices around the world. Your company is planning to execute the project from one of the new locations but you find the local rules and regulations prevent such a project to be carried out in the location. You work with the administrative team to find a new location. The strategy that you use to deal with the problem is best described by :

  1. accepting risk.
  2. mitigating risk.
  3. transfering risk.
  4. avoiding risk.

source (www.pmgurus.com)

1

Question 1: risk tolerance.

Question 2: risk avoidance.

Explanation: #1: The definition between tolerance and threshold is a distinction that I don't think adds a lot of real value; however, for the purposes of the test, it matters. Tolerance suggests a firm number that you cannot exceed. It is a yes or no equation. In this case, it is 20 days unfavorable variance. Threshold suggests more of a range as you approach your tolerance. In this case, the threshold might be 12 to 16 or 17 days unfavorable variance, which is where you may begin mitigating or contingent activities for recovery. #2: The local rules prohibit the work from taking place at that location. If you choose to do the work anyway, you are taking on risk of getting caught or other adverse consequences. If you did that, you are accepting the risk and possibly mitigating by doing whatever actions to prevent getting caught or minimizing the impact of getting caught. By choosing a new location, you are avoiding that risk.

EDIT: One More Question:

I think PMI would expect the answer to be "transfer." The PMBoK Guide over simplifies risk management to these very simple constructs that are to be used for complex situations. And so, often times, you really have multiple answers that are correct and, even more precise, you are doing several risk treatments at once.

But transfer, as far as PMI is concerned, I think best fits the situation. Not have the right skills is an issue...which becomes a risk factor for performance issues down the line. By outsourcing, you are transferring the probable performance issues to another organization...just like buying insurance. In reality, however, you are mitigating, avoiding, and transferring all at once since not having the right skills has multiple downstream probable impacts. But you have to answer it the way PMI wants you to answer.

This is my opinion of the answers. It is best, the way the questions are framed, to get other opinions, too. I passed the test but did not get all the answers right. :)

  • The best explanation so far. Not even in the site it has been explained. Really nice distinctin between tolerance and threshold. – user9090 May 15 '14 at 6:21
  • An even better one was by Carl Pritchard: Outfielder is running towards the fence. The fence represents risk tolerance as it is firmly cemented into the ground. The warning strip about 15 feet from the fence represents threshold. At the threshold the outfielder begins to mitigate before running into the fence, including slowing down and focusing on the fence as well as the ball. – David Espina May 15 '14 at 10:20

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