PMI Risk Management Professional (PMI-RMP) — Question 76

The risk manager is prioritizing risks based on the potential impact to cost and schedule and identifies the following 4 risks:
Risk 1 has a US$500,000 potential cost increase, and a 60 day potential schedule slippage, with a 25% probability of occurring.
Risk 2 has a US$200,000 potential cost increase, and a 20 day potential schedule slippage, with a 60% probability of occurring.
Risk 3 has a US$1,200,000 potential cost increase, and a 90 day potential schedule slippage, with a 10% probability of occurring.
Risk 4 has a US$600,000 potential cost increase, and a 70 day potential schedule slippage, with a 20% probability of occurring.
Using expected monetary value calculation, which risk has the greatest potential impact to cost and schedule?

Answer options

• A. Risk 1
• B. Risk 2
• C. Risk 3
• D. Risk 4

Correct answer: A

Explanation

Risk 1 has the highest expected monetary value calculated by multiplying its cost impact by its probability of occurrence. The other risks, despite having significant cost impacts, either have lower probabilities or lower potential costs that result in a smaller expected monetary value compared to Risk 1.