Ranga's 51 hot topics to remember for Risk Management Professional (RMP) exam

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Prepared by Rangarajan Ramaswamy, PMP, PMI-SP, PMI-RMP Page 1 of 5 RANGA’S 51 HOT TOPICS TO REMEMBER FOR RISK MANAGEMENT PROFESSIONAL (RMP) EXAM 1. A contingency plan is a planned action to be taken if a threat or an opportunity happens. A fallback plan is implemented if the contingency plan is not effective or fails. A secondary risk is associated with risks pertaining to risk response. A workaround is an immediate fix needed if an unidentified or unanticipated risk occurs during execution stage. 2. A Pre-mortem is the process of "evaluating" a project before it has actually been done, to identify potential risks on the project. 3. Assumption testing is done during Perform Qualitative Risk Assessment process. In assumption testing, the stability and consequence are rated from 1 to 10. A stability rating of 5 to 10 means the assumption is valid and a consequence rating of 5 to 10 means the assumption could have large impact on the project. 4. It is important to analyze assumptions made when determining risk to uncover the consequences if the assumptions are false. 5. Mutual exclusivity in decision tree model - Two events are called mutually exclusive if both cannot occur in a single trial. Example: Flipping a coin will always give only 1 result (Head or Tail). 6. FMEA (Failure Mode Effect Analysis) is used to identify potential causes of product failure, determine the effects, and identify actions to mitigate the failures. 7. Risk rating is something between 1 10. Risk Score is calculated as P*I. Comparing the risk scores of risks in the project results in the Risk Ranking within the project. 8. Residual risks are risks that have been passively accepted, or for which contingency plans have been created. It is important that management be informed of risks that have been passively accepted, as well as the risks for which contingency and fallback plans have been created. 9. Residual risks are those risks that remain after Plan Risk Response process. 10. Project Cost breakdown is as follows:- a. Work package estimate = Summation of activity estimate b. Control account estimate = Summation of work packages estimate c. Project estimate = Summation of Control accounts estimate d. Cost baseline = Project estimate + Contingency reserve e. Cost budget = Cost baseline + Management reserve 11. Management reserve is usually a percentage of the total project cost. The contingency reserve is the expected monetary value (EMV) of the risks.

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Ranga's 51 hot topics to remember for Risk Management Professional (RMP) exam

Transcript of Ranga's 51 hot topics to remember for Risk Management Professional (RMP) exam

Page 1: Ranga's 51 hot topics to remember for Risk Management Professional (RMP) exam

Prepared by Rangarajan Ramaswamy, PMP, PMI-SP, PMI-RMP Page 1 of 5

RANGA’S 51 HOT TOPICS TO REMEMBER FOR RISK MANAGEMENT PROFESSIONAL (RMP) EXAM

1. A contingency plan is a planned action to be taken if a threat or an opportunity happens. A fallback

plan is implemented if the contingency plan is not effective or fails. A secondary risk

is associated with risks pertaining to risk response. A workaround is an immediate fix needed if an

unidentified or unanticipated risk occurs during execution stage.

2. A Pre-mortem is the process of "evaluating" a project before it has actually been done, to identify

potential risks on the project.

3. Assumption testing is done during Perform Qualitative Risk Assessment process. In assumption

testing, the stability and consequence are rated from 1 to 10. A stability rating of 5 to 10 means the

assumption is valid and a consequence rating of 5 to 10 means the assumption could have large

impact on the project.

4. It is important to analyze assumptions made when determining risk to uncover the consequences if the

assumptions are false.

5. Mutual exclusivity in decision tree model - Two events are called mutually exclusive if both cannot

occur in a single trial. Example: Flipping a coin will always give only 1 result (Head or Tail).

6. FMEA (Failure Mode Effect Analysis) is used to identify potential causes of product failure,

determine the effects, and identify actions to mitigate the failures.

7. Risk rating is something between 1 – 10. Risk Score is calculated as P*I. Comparing the risk scores

of risks in the project results in the Risk Ranking within the project.

8. Residual risks are risks that have been passively accepted, or for which contingency plans have been

created. It is important that management be informed of risks that have been passively accepted, as

well as the risks for which contingency and fallback plans have been created.

9. Residual risks are those risks that remain after Plan Risk Response process.

10. Project Cost breakdown is as follows:-

a. Work package estimate = Summation of activity estimate

b. Control account estimate = Summation of work packages estimate

c. Project estimate = Summation of Control accounts estimate

d. Cost baseline = Project estimate + Contingency reserve

e. Cost budget = Cost baseline + Management reserve

11. Management reserve is usually a percentage of the total project cost. The contingency reserve is the

expected monetary value (EMV) of the risks.

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RANGA’S 51 HOT TOPICS TO REMEMBER FOR RISK MANAGEMENT PROFESSIONAL (RMP) EXAM

Prepared by Rangarajan Ramaswamy, PMP, PMI-SP, PMI-RMP Page 2 of 5

12. Monte Carlo simulation is used to determine time and cost based on probability distribution.

13. Project Manager holds the Primary responsibility of identifying risk.

14. All the Risks for which PM and team has no control over, management should be involved.

15. The team is more confident and optimistic about the project during the Plan Risk Response process.

16. Meetings should not be required before the approved fallback or contingency plan is implemented.

17. PM should spend most of the time preparing contingency plans.

18. The highest-risk path is the path through the network diagram that has the highest risk score. The

activities on this path may not immediately follow each other, as activities do on the critical path.

19. Exploiting an opportunity means increasing its probability. Enhancing an opportunity means

increasing its impact.

20. The ultimate outcome of the risk ranking process is that the non-top risks are separated from the top

risks, so that the top risks can be moved forward.

21. The risk reserve report keeps a running balance of the remaining reserve, and is used like a

checkbook.

22. Path convergence is best described as many activities leading into a central activity. This adds risk to

that central activity.

23. Perform qualitative risk analysis is subjective evaluation.

24. Perform quantitative risk analysis is objective evaluation.

25. The team needs to understand the risk tolerance areas for the project to know the acceptable level of

risk and, therefore, which risks need to be addressed.

26. Stakeholder risk tolerance is identified during the Plan Risk Management process.

27. When an identified risk arises, it is not necessary to hold a meeting, and the risk response plan does

not require review. Of course, since the risk has occurred, it was not avoided.

28. It is the responsibility of risk governance board to ensure the project is following the standard policies

during all processes.

29. Risk management "metrics" are used to measure how the project risk management team is performing

against the plan.

30. Purpose of risk audit is to determine the effectiveness of risk management team.

31. Project charter and WBS helps prevent re-work, wasted time & effort.

32. While calculating worst case scenarios simply neglect the probability and add the negative impacts.

Similarly, for calculating best case scenarios neglect the probability and add the positive impacts.

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RANGA’S 51 HOT TOPICS TO REMEMBER FOR RISK MANAGEMENT PROFESSIONAL (RMP) EXAM

Prepared by Rangarajan Ramaswamy, PMP, PMI-SP, PMI-RMP Page 3 of 5

33. Prompt lists are used to help ensure that all aspects are covered during risk identification. A prompt

list categorizes risks into types or areas and is usually specific to a project type and an organization’s

function (e.g. legal, commercial, technical, design, construction, testing etc.)

34. Many workarounds on a project indicate that there was a lack of adequate project planning and the

project is likely in trouble.

35. Work Performance Data is raw data such as physical progress, start finish dates. Work Performance

Information is analysis of performance data such as change requests, forecasted estimates. Work

Performance Report is physical or electronic representation of Work Performance Information such

as status reports, memos, notes, dashboards.

36. Contingency reserves are associated with the “known-unknowns,” which may be estimated to account

for the unknown amount of rework.

37. List of formulae to be remembered :-

a. No. of communication channels N = n(n-1)/2 (where n is no of stakeholders)

b. Duration or cost for triangular distribution E= (O + M + P)/3

c. Duration or cost for Beta distribution (traditional PERT) E= (O + 4M + P)/6

d. CV = EV - AC

e. SV = EV - PV

f. CPI = EV/AC

g. SPI = EV/PV

h. EAC forecast for work performed at the budgeted rate: EAC = AC + (BAC – EV)

i. EAC forecast for work performed at the present rate CPI : EAC = BAC / CPI

j. EAC forecast for ETC work considering both SPI and CPI factors:

EAC = AC + [(BAC – EV) / (CPI X SPI)]

k. TCPI based on the BAC: (BAC – EV) / (BAC – AC)

l. TCPI based on the EAC: (BAC – EV) / (EAC – AC).

m. In short TCPI = work remaining/funds remaining

n. Variance at completion VAC = BAC – EAC

o. Activity standard deviation is (P-O)/6

p. Activity variance is square of standard deviation = [(P-O)/6]2

38. Projects with TCPI > 1 is harder to complete and TCPI < 1 is easier to complete.

39. CPI>1(Under Budget) ,CPI=1(At budget) , CPI<1 (Over Budget)

40. SPI>1(Ahead of plan) , SPI=1(As planned) , SPI<1 (Behind Plan)

41. In repetitive processes, the control limits are generally set at ±3 sigma around a process mean that has

been set at 0 sigma. A process is considered out of control when: (1) a data point exceeds a control

limit; (2) seven consecutive plot points are above the mean; or (3) seven consecutive plot points are

below the mean.

42. Non-critical risks are maintained in Watchlist and revisited periodically (mostly during execution and

M&C).

43. Expectancy Theory - Employees who believe that their efforts will lead to effective performance

and who expect to be rewarded for their accomplishments will remain productive as rewards meet

their expectations.

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44. Perquisites (Perks) - Some employees receive special rewards, such as assigned parking

spaces, corner offices, and executive dining.

45. Fringe Benefits- These are the "standard" benefits formally given to all employees, such as education

benefits, insurance, profit sharing etc.

46. McGregor's Theory of X and Y–

a. Theory X- Managers who accept this theory believe that people need to be watched

every minute. They believe employees are incapable, avoid responsibility, and avoid

work whenever possible.

b. Theory Y- Managers who accept this theory believe that people are willing to work

without supervision, and want to achieve. They believe employees can direct their own

efforts.

47. Maslow's Hierarchy of Needs – represents a pyramid that shows how people are motivated and states

that one cannot ascend to the next top level until the levels below are fulfilled.

Top level: Self-actualization – Self-fulfillment, growth, learning

Esteem: - Accomplishment, respect, attention, appreciation

Social - Love, affection, approval, friends, association

Safety – Security, stability, freedom from harm

Base level: Physiological – Need for air, water, food, housing, clothing

48. David McClelland's Theory of Needs (or Acquired Needs Theory) states that a person falling into one

category would be managed differently than a person falling into another category. The categories

are:-

a. Achievement - These people should be given projects that are challenging but are

reachable. (Recognition)

b. Affiliation - These people work best when cooperating with others. They seek approval

rather than recognition.

c. Power - People whose need for power is socially oriented, these people like to organize

and influence others.

49. Herzberg's Theory deals with hygiene factors and motivating agents. Poor hygiene factors may

demotivate, but improving them, under most circumstances, will not improve motivation.

a. Examples of hygiene factors are:

i. Working conditions

ii. Salary

iii. Personal life

iv. Relationships at work

v. Security

vi. Status

b. Motivating Agents What motivates people is the work itself, including such things as:

i. Responsibility

ii. Self-actualization

iii. Professional growth

iv. Recognition

50. Neuro-linguistic programming (NLP) is an approach to communication, personal development, and

psychotherapy. The first stage being the act of establishing and maintaining rapport between the

practitioner and the client which is achieved through pacing and leading the verbal (e.g., sensory

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predicates and keywords) and non-verbal behavior (e.g., matching and mirroring non-verbal behavior,

or responding to eye movements) of the client.

51. Correlation coefficient is a measure that determines the degree to which two variable's movements are

associated, giving a value between +1 and −1 inclusive, where 1 is total positive correlation, 0 is no

correlation, and −1 is total negative correlation.

What to expect in the exam?

1. Around 30% of questions related to above mentioned points.

2. Around 50% of situation based questions (You are the Risk manager of a company etc.)

3. Around 10% of questions related to Monte Carlo simulation. Simulation result will be displayed

and asked to calculate project average budget, P50, P80 etc.

4. Around 5% of questions are like what to do if the risks are not identified in the risk register.

5. Remaining 5% of questions related to Probability, confidence and stability level. Questions based

on when to use contingency reserve and when to use management reserve. Questions on Risk

averse and Risk seeking managers. Questions on different types of simulations MCS and LHS

(Monte Carlo sampling and Latin hypercube sampling ) etc.

References:-

1. Rita Mulcahy’s Risk Management

2. Rita Mulcahy’s PMP Exam Prep

3. PMBOK 5th Edition

4. Investopedia.com

5. Wikipedia.org

xxx---My wishes and good luck for your exam---xxx

I would love to receive your feedback and you can reach me through LinkedIn at

http://qa.linkedin.com/in/rangarajanramaswamy/