Project Risk Analysis – Answers to the Judgement Test

Question 1:

Billionaire Roland Drump wants to build a new Cleopatra casino in Pacific City. He estimates that casino will only cost $200 Million dollars. However he plans to do some additions:

  • 200 ft Golden statue of Cleopatra and Drump together has an estimated cost of $40 M, but the probability that he will build this statue is 30%.
  • 1000 sq ft fresco “Drump in the Swimming Pool” has an estimated cost of $30 M, with a 20% probability that it will be constructed.
  • 300 ft. Gallery with portraits of Drump and other executives of Drump Enterprises has an estimated cost of $50 M with a 10% probability it will be completed.

What is the expected cost of casino?

  • A. $223 M
  • B. $320 M
  • C. $252 M

Correct answer is A). You need to multiply probability on cost, sum them and add original $200 M. We will learn about project expected value in Chapter 12.

Question 2:

A group of gangsters are planning to rob Washington-Washington casino in Las Vegas.   Their initial plan:

  • Task 1. John and Don will plant the explosives and blow up a power transmission line going to Las Vegas. It will take 30 minutes to 1 hour
  • Task 2. Starting the same time Danny and Lenny will steal a getaway car and park it near the casino, which will take 10-20 minutes
  • Task 3. After power is knocked off, Terry and Barry will rob the casino. It will take 5-10 minutes

Uncertainties in duration of which task will affect total robbery time the most:

  • A. Tasks 1
  • B. Only task 2 and 3
  • C. All tasks

Correct answer is A). Task 1 has most uncertainties. Task 2 is not on the critical path at all. We will learn about sensitivity analysis in Chapter 9.

Question 3:

Billionaire Roland Drump decided to arm all casino dealers in his new Cleopatra casino in Pacific City with assault rifles so they can kill unruly clients or preemptively kill clients they suspect might become unruly. Killing clients are:

  • A. Mitigation Plan
  • B. Response Plan
  • C. Both Mitigation Plan and Response Plan

Correct answer is C). If dealer kills client before he or she become unruly, it is a mitigation plan. If dealer kills client after he or she become unruly it is a response plan. In this case it is both mitigation and response plans, because dealer will be shooting on all types of clients. Read Chapter 4 for more information.

Question 4:

Mexican drug lord El Stuppo and his associates are digging an escape tunnel from his prison cell. He found that his project risks will fall in to three categories: duration (tunneling could take too much time), cost (tunneling could cost too much money), and security (somebody in prison will discover this project). Duration is two times more important for him than cost and security is three times more important than duration. What are the priorities of these categories?

  • A. Duration 29%, Cost 26%, Security 45%
  • B. Duration 30%, Cost 20%, Security 50%
  • C. Duration 35%, Cost 20%, Security 45%

Correct answer is A). This can be calculated using Analytic Hierarchy Process, which we will discuss in Chapter 3.

Question 5:

The Beast must learn to love another and earn her love in return before the rose’s last petal falls. He has 10 day remaining, but developing a loving relationship with Beauty will most likely take 6 days but could be completed as early as 4 days or take up to 12 days and it is defined by triangular distribution. What it the chance that the Beast will be able to break the spell?

  • A. 87%
  • B. 92%
  • C. 95%

Correct answer is C). You may use analytical solution, but it is simpler to do using Monte Carlo simulation. We will learn about distributions and Monte Carlo simulations in Chapter 5 of this book.

Question 6:

The Famous magician David Ironfield is planning to saw the body of his assistant in two during the show. Usually it takes him 1 minute to cut the body in half, but this time he has a new magic box and expects two potential delays. There is a 30% chance that assistant may not be able to bend her legs inside the box fast enough. This would delay the trick by 20%. There is also 20% chance that the second assistant, whose legs are supposed to stick out after body is cut, would not be able to hide her head. It will delay the trick by 50%. How long the trick would take on average:

  • A. 1 minute 30 seconds
  • B. 1 minute 10 second
  • C. 1 minute 5 second

Correct answer is B). This is a cumulative effect of two uncorrelated risks. You need to perform Monte Carlo simulations with risk events. We will discuss it in chapters 6, 7 and 8.

Question 7:

Young wizard Jerry Throter is trying to defeat a troll, which usually takes 10-12 minutes. So far fight continues for 8 minutes and Jerry Throter estimates that only 50% of his battle is complete: the troll is badly wounded, but continues fighting and making inhuman sounds. How much time would it take to defeat the troll with certainty of 70%:

  • A. From 15.2 minutes
  • B. From 18.3 minutes
  • C. From 20.5 minutes

Correct answer is B). This is related to automatic calculation of remaining duration for partially completed tasks, which we will discuss in Chapter 10.

Question 8:

Famous crook Terry Fadoff is working on new financial pyramid scheme. He is planning to pump and dump stock of Fadoff Enterprises and get $10-12 M from it. The issues is his must to pay $4-5 M in bribes, $3-4 M to his associates, and $1-2 M to develop an accounting software to hide his activities. All uncertainties are uncorrelated and  defined by uniform distributions. What is his maximum payout  after all expenses with 80% probability:

  • A. $1 M
  • B. $2 M
  • C. $3 M

Correct answer is B). You need to perform Monte Carlo simulation and calculate 80th percentile (P80) of the statistical distribution of project cost. You may read percentiles in Chapter 5.

Question 9:

Two pirates, Jonny Death and Orlando Plume are preparing an expedition to Treasure Island. The Expedition would cost in dollar equivalents $80,000 to $120,000 and take 5 – 6 months, but most likely 5.2 months. What would be chance that cost will be below $100,000 and duration will be below 5.4 months at the same time?

  • A. Around 60%
  • B. Around 50%
  • C. Around 30%

Correct answer is C). This question is related to Joint Confidence Level analysis which we will discuss in Chapter 13 of this book.

Question 10:

Popular singer Tracy Terry is planning new a Global Tour, which would take 60 days.

  • Her stopover in Bujumbura (Burundi) could  be delayed by 5 days with a probability of 50% if her local fans demand  another concert.
  • Her stopover in Tobolsk (Russia) could be delayed by 2 days with a probability of 80%, as she may miss a flight due to signing autographs for  her fans.
  • Her stopover in Nukuʻalofa (Kingdom of Tonga) could  be delayed by  3 days with a probability of 60% because the King may invite her for a lunch.

Which stopover could cause the longest delay on her tour?

  • A. Bujumbura
  • B. Tobolsk
  • C. Nukuʻalofa

Correct answer is A). It is related to ranking risks for quantitative risk analysis. You will learn about it in Chapter 9 of the book.

Now score yourself:

Number of correct answers 8-10: You don’t need to use any computer software for project risk analysis, because your brain is a computer.. Your analytical abilities are superior. You can tell your management that they don’t need to buy a computer for you and can give you the money they saved .

Number of correct answers 4-7: Not so bad. If decision makers as CEO and politicians would have such good judgment and ability to analyze things, our salary would go up and taxes down. However we still recommend you read this book, there is always a space to improve your analytical abilities.

Number of correct answers 0-3: Don’t worry; most people have difficulties answering these questions without computer analysis. In this book, you will learn how such types of analysis is performed.