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PMP Practice Questions #62

In a manufacturing project aimed at achieving significant cost savings, project manager Sophia encounters a risk that jeopardizes the project’s key outcome. Recent geopolitical shifts have caused a sharp increase in the cost of critical raw materials, threatening the project’s cost-saving goals. Sophia recognizes this challenge is beyond her role’s scope. What should her immediate action be to effectively manage this risk?

A) Wait for the geopolitical situation to stabilize, hoping material costs will decrease.
B) Escalate the issue to higher management and relevant stakeholders for strategic guidance and decision-making.
C) Independently seek alternative suppliers for raw materials in an attempt to maintain cost objectives.
D) Propose revising the project’s cost-saving targets in consultation with stakeholders, given the changed circumstances.

Analysis:

In this manufacturing project, project manager Sophia is faced with a significant risk due to recent geopolitical shifts causing an increase in the cost of critical raw materials. This risk threatens the project’s key objective of achieving cost savings. Sophia recognizes that the challenge is beyond her role’s scope, necessitating a strategic response to manage this risk effectively.

Analysis of Options:

Option A: Wait for the geopolitical situation to stabilize, hoping material costs will decrease. This option represents a passive approach to risk management, essentially accepting the risk without proactive action. Given the project’s critical cost-saving KPIs and the high impact of the risk, a passive approach is not advisable. It fails to address the need for active risk management and could lead to project failure.

Option B: Escalate the issue to higher management and relevant stakeholders for strategic guidance and decision-making. Escalating the issue to higher management and relevant stakeholders is a strategic and proactive approach. It acknowledges the complexity and scope of the risk and involves those with the authority and resources to make strategic decisions. Given the external nature and significant impact of the risk, this option is appropriate for Sophia to pursue as an immediate action.

Option C: Independently seek alternative suppliers for raw materials in an attempt to maintain cost objectives. While seeking alternative suppliers could be part of a broader solution, doing so independently might not be the most effective approach. This situation requires collaborative decision-making and a strategic approach, considering the external nature of the risk. Sophia might explore this option after consulting with higher management and stakeholders, but it should not be the first action taken.

Option D: Propose Revising the Project’s Cost-Saving Targets in Consultation with Stakeholders, Given the Changed Circumstances. Proposing to revise the cost-saving targets is a potential response to the changed circumstances. However, this should be considered after evaluating all possible risk management strategies, including escalation and seeking alternative solutions. It is more of a reactive approach and should follow an initial attempt to manage the risk proactively.

Conclusion: Considering the external origin and high impact of the risk, along with Sophia’s recognition that the challenge is beyond her role’s scope, Option B (Escalate the Issue to Higher Management and Relevant Stakeholders for Strategic Guidance and Decision-Making) is the most suitable immediate action. This approach ensures strategic involvement in decision-making and aligns with proactive risk management principles. Escalation provides the opportunity to explore various risk response strategies, including potentially seeking alternative suppliers or revising cost targets, with the guidance of higher management and stakeholders.

PMP Exam Content Outline Mapping

DomainTask
Process Task 3 Assess and manage risks
BusinessTask 3 Evaluate and address external business environment changes for impact on scope

Topics Covered

  • Negative Risk Response Strategies (Escalate and Accept)
  • Outcome Delivery

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