A risk manager for a new product development project has worked diligently with stakeholders and the project team to identify and document risks. These project risks vary widely in probability and imp

Question

Options

• AWork with the project team to conduct a decision tree analysis for each risk or set of related risks.
• BCalculate the expected monetary value (EMV) of each risk and use these outputs to inform and
• CConduct a Monte Carlo simul-ation to understand the probabilities of various risk outcomes.
• DUse the risk breakdown structure (RBS) to calculate the total cost of mitigating all risks and ensure
• EFocus attention and resources on identified risks with the highest potential to impact the project.

• A
  71% (24)
• C
  9% (3)
• D
  21% (7)

Explanation

Three actions are correct: (A) Decision tree analysis evaluates choices and their associated outcomes, helping the team understand which risk responses are viable and what resources different response paths would require. (B) Calculating Expected Monetary Value (EMV) quantifies each risk in financial terms (probability × impact), providing a data-driven basis for determining how much resource investment is justified per risk response. (E) Focusing resources on risks with the highest potential impact is a core risk prioritization principle-resource allocation should be weighted toward risks that matter most to project outcomes. Option C (Monte Carlo simulation) provides probability distributions for overall project outcomes but is less suited to resource allocation for individual risk responses. Option D is incorrect because the RBS is a categorization tool, not a cost-calculation mechanism for mitigation resources.

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