TOPIC: Free PMP® Exam Sample Question of the Week

Hello everyone! Here is this week's free PMP® exam sample question from the PM Exam Simulator.

A project team is mulling over two different risk responses for inclusion in the risk register. One response has two criteria that must be met and costs $5,000. The other response has four criteria that must be met, but only costs $2,000. What action is the project team least likely to take in selecting the best risk response?

A. Running a Monte Carlo simulation
B. Performing an alternatives analysis
C. Conducting a cost-benefit analysis
D. Using multi-criteria decision analysis

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HINT: There are only two options under consideration in this scenario.

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Answer and Explanation:
The correct answer is A.

In this scenario, the project team is deciding between two different risk responses for inclusion in the risk register, which suggests that the project team is currently performing the Plan Risk Responses process. Alternatives analysis, cost-benefit analysis, and multicriteria decision analysis are all techniques which are commonly used during the Plan Risk Responses process to select risk responses. Note, the question is asking for the action that the project team is 'least' likely to take in selecting the risk response. A Monte Carlo simulation is a data analysis technique where a computer model is iterated many times, with the input values chosen at random for each iteration driven by the input data, including probability distributions and probabilistic branches. Outputs are generated to represent the range of possible outcomes for the project. However, in this case, there are only two options under consideration which can serve as inputs for the simulation. Thus, a Monte Carlo simulation would only be able to perform two unique iterations rather than the many iterations required to produce a probability distribution. Using a Monte Carlo simulation is not appropriate when only a small, finite number of options are under consideration. Since there are only two options under consideration, in this case, a Monte Carlo simulation is not the appropriate tool for the project team to use in selecting the best risk response.

Details for each option:

A. Running a Monte Carlo simulation
Correct. A Monte Carlo simulation is an analysis technique where a computer model is iterated many times, with the input values chosen at random for each iteration driven by the input data. This technique is typically used with the Develop Schedule process and the Perform Quantitative Risk Analysis process. However, the scenario implies the Plan Risk Responses process is underway. Since the Monte Carlo simulation is 'least' likely to be used during that process, this choice is the best answer to the question asked.

B. Performing an alternatives analysis
Incorrect. An alternative analysis is a technique used to evaluate identified options in order to select the options or approaches to use to execute and perform the work of the project. The fact that there are two different responses to the risk that are being evaluated means that alternatives analysis is a viable tool for the project team to use in this situation.

C. Conducting a cost-benefit analysis
Incorrect. A cost-benefit analysis is a financial analysis tool used to determine the benefits provided by a strategy against its costs. Because the cost is a factor in the scenario described along with the work required to monitor and execute the response, the team may conduct a cost-benefit analysis to help select the best risk response.

D. Using multi-criteria decision analysis
Incorrect. Multicriteria decision analysis uses a decision matrix to provide a systematic approach for establishing key decision criteria, evaluating and ranking alternatives, and selecting a preferred option. Criteria for risk response selection may include the cost of the response, likely effectiveness of the response, timing constraints, level of impact if the risk occurs, etc. Thus multicriteria decision analysis may be an effective technique in the situation presented by the question.

Reference: A Guide to the Project Management Body of Knowledge (PMBOK® Guide) – Sixth Edition, Project Management Institute Inc., 2017, Page(s) 433, 446

Hallo, Mary Kathrine.
First off, I would like to thank you so much for your invaluable effort, you daily puts in place, to manage this fundamental blog.
I constantly have a look at your thorough responses and find them quite impressive.
To be honest, this time I did not understand what the right answer is.
It seems like A is the best response, but within the explanation section you wrote Montecarlo is not the appropriate tool.
Whereas the other techniques may be used to tackle the best risk response.
May you please further clarify what the best answer is and why the other ones are not ?
Thanks again so much, Mary Kathrine.
Have a very nice day.
Kind Regards
Michele Lo Giacco