PMI-RMP · Question #3
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…
The correct answer is A. The risk exposure of the event is $245,000. Risk exposure (also called Expected Monetary Value or EMV) is calculated as: Probability × Impact = 0.70 × $350,000 = $245,000. This value represents the weighted financial risk that should guide how much you are willing to spend on a risk response. It would be irrational to…
Question
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?
Options
- AThe risk exposure of the event is $245,000.
- BThe risk exposure of the event is $500,000.
- CThe risk exposure of the event is $350,000.
- DThe risk exposure of the event is $850,000.
How the community answered
(33 responses)- A82% (27)
- B9% (3)
- C6% (2)
- D3% (1)
Explanation
Risk exposure (also called Expected Monetary Value or EMV) is calculated as: Probability × Impact = 0.70 × $350,000 = $245,000. This value represents the weighted financial risk that should guide how much you are willing to spend on a risk response. It would be irrational to spend more than $245,000 to address a risk whose EMV is $245,000. The project budget of $500,000 and duration are distractors - they do not factor into the EMV calculation. The full $350,000 impact is only relevant if the event is certain to occur (probability = 1.0).
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