Business Case Writing Risk Assessment and Mitigation 2 — Questions and Answers
Question 1: Which risk is described as an unknown risk that cannot be identified in advance?
- Known-known
- Known-unknown
- Unknown-unknown (Correct answer)
- Residual risk
Correct answer: Unknown-unknown
Unknown-unknowns are risks that cannot be anticipated because they fall outside current knowledge or experience.
Question 2: A business case should include a risk-adjusted NPV because:
- Regulators require it
- It reflects the impact of uncertainty on expected financial outcomes (Correct answer)
- It always results in a higher NPV
- It eliminates the need for sensitivity analysis
Correct answer: It reflects the impact of uncertainty on expected financial outcomes
Risk-adjusting the NPV by using higher discount rates or probability-weighting scenarios gives decision-makers a more realistic financial picture.
Question 3: In business case writing, a 'risk trigger' is:
- The project kickoff date
- An event or condition that signals a risk is about to occur (Correct answer)
- The budget threshold
- A stakeholder complaint
Correct answer: An event or condition that signals a risk is about to occur
Risk triggers are warning indicators that alert the team to take pre-planned mitigation actions before or as a risk materializes.
Question 4: Which mitigation strategy is most appropriate for a high-probability, high-impact risk?
- Risk acceptance
- Risk avoidance or aggressive risk reduction (Correct answer)
- Risk transfer to a minor vendor
- Ignoring it until it occurs
Correct answer: Risk avoidance or aggressive risk reduction
High-probability, high-impact risks warrant the strongest response — either eliminating the risk source or taking aggressive steps to reduce its likelihood and impact.
Question 5: In a business case, 'risk appetite' refers to:
- The number of risks listed in the register
- The amount and type of risk an organization is willing to accept in pursuit of its objectives (Correct answer)
- The project manager's personal risk tolerance
- The maximum allowable project budget
Correct answer: The amount and type of risk an organization is willing to accept in pursuit of its objectives
Risk appetite defines the boundaries within which an organization is comfortable operating and should be explicitly stated in the business case risk section.
Question 6: A 'secondary risk' in a business case arises when:
- A second project is launched
- A risk response itself introduces a new risk (Correct answer)
- Two risks occur simultaneously
- The risk register is updated
Correct answer: A risk response itself introduces a new risk
Secondary risks are unintended new risks that emerge as a direct result of implementing a risk response strategy.
Business Case Writing Risk Assessment and Mitigation 2
Which risk is described as an unknown risk that cannot be identified in advance?