PMI Risk Management Professional Practice Exam

Which factor is crucial in determining the overall risk exposure of a project?

1. The number of risks identified

2. The probability and impact of risks

3. The cost of risk mitigation strategies

4. The project manager’s experience with risks

The correct answer is: The probability and impact of risks

The probability and impact of risks are fundamental components in determining a project's overall risk exposure. Each identified risk has the potential to affect project objectives, and it is essential to evaluate both how likely a risk is to occur (probability) and the extent of damage or benefit it may cause if it does occur (impact). When assessing risk exposure, a high probability combined with a significant impact leads to a greater overall risk, which aids project managers in prioritizing risks effectively. This dual consideration allows for more informed decision-making regarding mitigation strategies, resource allocation, and contingency planning. While identifying the number of risks and understanding the costs associated with mitigation strategies are important factors in risk management, they do not directly indicate the true exposure the project faces. Similarly, a project manager's experience can influence how risks are handled, but it does not in itself assess the actual risk exposure of the project. Therefore, focusing on the probability and impact provides a clearer picture of the potential threats and opportunities the project may encounter.