As per the risk analysis process carried out for a project, two risks are registered. The probability risk A will occur is 40% and its monetary impact to the project is US$100,000. The probability risk B will occur is 60% and its monetary impact to the project is US$20,000 .
What is the total contingency budget that should be created?
A . US$68,000
B . US$52,000
C . US$120,000
D . US$80,000
Answer: B
Explanation:
In risk management, to calculate the contingency budget for risks, we use the Expected Monetary Value (EMV) formula: EMV=Probability of Risk×Impact of Risktext{EMV} = text{Probability of Risk} times text{Impact of Risk}EMV=Probability of Risk×Impact of Risk For Risk A:
Probability: 40% or 0.40
Impact: US$100,000
text{EMV of Risk A} = 0.40 times 100,000 = US$40,000
For Risk B:
Probability: 60% or 0.60
Impact: US$20,000
text{EMV of Risk B} = 0.60 times 20,000 = US$12,000 Total contingency budget = EMV of Risk A + EMV of Risk B 40,000 + 12,000 = US$52,000
Thus, the total contingency budget required for both risks is US$52,000. This approach follows PMI’s risk management guidelines, specifically under the "Quantitative Risk Analysis" process. This process focuses on determining numerical probabilities and monetary impacts to compute the expected financial impact of identified risks.
Latest PMI-RMP Dumps Valid Version with 115 Q&As
Latest And Valid Q&A | Instant Download | Once Fail, Full Refund