A new project manager was assigned to a project during implementation. The project manager realized that new tax policies are creating a risk for a cost overrun by 25%. The project manager updated the risk register and kept the project running as normal. The CEO has announced that the project could be cancelled since the acceptable cost overrun is only 20%. The project manager was quite surprised as this was new information.
What should the project manager have done to avoid this?
The project manager should have ensured the risk tolerance of the company was properly updated. Understanding the organization's risk tolerance and acceptable cost overrun limits is crucial for effective risk management. By knowing that the acceptable cost overrun is 20%, the project manager would have been aware that the 25% potential overrun posed a significant threat to the project's viability and could have taken appropriate action. This could include escalating the issue, reprioritizing risk responses, or even reevaluating the project's feasibility in the context of the new tax policies.
The risk tolerance of the company was 20%. PM was unaware of this information. Else, should have been prioritized the risk and developed mitigation plan for it. So I think, answer D looks closer than C. Any other thoughts?
Yes agree as part of risk management plan ,company's risk tolerance should have been updated and closely being monitored during project execution
Address issue directly, this one is for proper risk management.
D, it is not about risk "response", it is about the risk tolerance
D. Project manager was totally surprised that risk tolerance is 20% which meant there are no documentation on this information available for the project manager. If this information is readily available for the project manager from the start, he could have plan for proper mitigation or inform stakeholders that the cost had overrun by 25% due to new tax regulation, and not continuing with the project.
In my opinion, if you chose (D) what is the benefit from ensuring the tolerance level!! the CEO wants to terminate the project. However, it's a correct procedure but not with this situation. Other choices did not make sense to me. I think the best answer is (C) because you need to do a real action or response to the coming risk. My analyzing could be wrong but this is what I imagined
D. Ensured the risk tolerance of the company was properly updated
Answer is D only
Ensured the risk tolerance of the company was properly updated and clearly understood before updating the risk register. This includes understanding the organization's risk appetite, thresholds, and tolerance levels, including the acceptable cost overrun percentage. In this case, the project manager was unaware of the 20% acceptable cost overrun limit, which is a critical piece of information that impacts project decision-making.
The project manager should have chosen option **D. Ensured the risk tolerance of the company was properly updated**. This would have allowed the project manager to be aware of the acceptable cost overrun limit set by the company. Being aware of this limit, the project manager could have planned and managed the project accordingly to ensure that the cost overrun does not exceed the acceptable limit. Remember, understanding and managing risks within the organization's risk tolerance is a key aspect of effective project management.
Answer is D
D should be correct
D. Ensured the risk tolerance of the company was properly updated. In this scenario, the project manager identified a significant risk related to new tax policies, which could lead to a cost overrun. However, the project manager did not consider the organization's risk tolerance or the acceptable level of risk for the project. It's crucial to align the project's risk management activities with the organization's risk tolerance and risk management policies.
Effective risk responses are vital if the risk management process is to meet its objectives of “… identifying, analyzing, and responding to project risk … including maximizing … positive events and minimizing … adverse events” (Project Management Institute, 2000). The Risk Response Planning phase is arguably the most important phase of the risk management process, since this is where appropriate actions are developed in the light of identified risks—both threats and opportunities. If effective responses are not developed and implemented, the risk process will fail, and the chances of the project achieving its objectives will be reduced.
C. Provided a proper risk response.
C. Provided a proper risk response. The project manager did update the risk register upon realizing the new tax policies posed a risk for cost overrun. However, simply updating the risk register is not sufficient to manage risks effectively. The project manager should have identified appropriate risk responses to mitigate or avoid the impact of the risk on the project objectives. In this case, the risk response could have included proactive cost-cutting measures to reduce the impact of the potential cost overrun, or exploring alternative approaches to the project that would not be affected by the new tax policies. By implementing a proper risk response, the project manager would have been better prepared to address the risk and avoid the potential cancellation of the project due to cost overruns.
BUT .. PM was unaware of cost over run policy. if he was then he would have defined risk response with cost over run within companies limit. this would had ensured that risk mitigation plan is placed and within organisation policy.
as a PM during Identify risk or plan risk respons should get references or input either OPA's or EEF's, new tax Policy is one of the EEF's.
Will go for A. Need to update comm plan
D. Ensured the risk tolerance of the company was properly updated.