PMI-RMP · Question #7
You are the project manager of the NKJ Project for your company. The project's success or failure will have a significant impact on your organization's profitability for the coming year. Management…
The correct answer is B. Risk utility function. The risk utility function (also called the risk tolerance or risk appetite curve) describes the relationship between an individual's or organization's willingness to accept risk versus the potential reward. When management demands early identification, avoidance, and…
Question
You are the project manager of the NKJ Project for your company. The project's success or failure will have a significant impact on your organization's profitability for the coming year. Management has asked you to identify the risk events and communicate the event's probability and impact as early as possible in the project. Management wants to avoid risk events and needs to analyze the cost-benefits of each risk event in this project. What term is assigned to the low- level of stakeholder tolerance in this project?
Options
- AMitigation-ready project management
- BRisk utility function
- CRisk avoidance
- DRisk-reward mentality
How the community answered
(21 responses)- A14% (3)
- B76% (16)
- C5% (1)
- D5% (1)
Explanation
The risk utility function (also called the risk tolerance or risk appetite curve) describes the relationship between an individual's or organization's willingness to accept risk versus the potential reward. When management demands early identification, avoidance, and cost-benefit analysis of every risk, it reflects a low risk tolerance - which is characterized by the risk utility function. Risk avoidance is a specific response strategy, not a description of tolerance level. Mitigation-ready project management and risk-reward mentality are not standard PMBOK terms. The risk utility function captures the stakeholder's psychological and organizational stance toward risk exposure.
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