CBA Risk Management & Mitigation 2 — Questions and Answers
Question 1: A budget analyst identifies that a key federal grant funding 30% of the agency's operations may not be renewed. Which risk response strategy is MOST appropriate?
- Accept the risk and do nothing until renewal is denied
- Transfer the risk to another department
- Develop contingency budget plans and identify alternative funding sources (Correct answer)
- Eliminate the program funded by the grant
Correct answer: Develop contingency budget plans and identify alternative funding sources
Developing contingency plans and alternative funding sources is the appropriate mitigation strategy for a significant funding dependency risk.
Question 2: In risk-adjusted budgeting, an 'expected value' calculation requires multiplying a risk's potential financial impact by its:
- Severity rating on a 1-10 scale
- Probability of occurrence (Correct answer)
- Time horizon in months
- Number of affected stakeholders
Correct answer: Probability of occurrence
Expected value (EV) = probability of occurrence × potential financial impact, allowing analysts to prioritize risks quantitatively.
Question 3: Which tool is MOST commonly used by government budget analysts to visually assess and prioritize multiple risks simultaneously?
- Gantt chart
- Risk heat map (probability-impact matrix) (Correct answer)
- Pareto chart
- Work breakdown structure (WBS)
Correct answer: Risk heat map (probability-impact matrix)
A risk heat map plots risks by probability and impact, enabling analysts to visually prioritize which risks require immediate mitigation.
Question 4: A federal agency's budget is heavily dependent on a single contractor for IT services. This represents which type of concentration risk?
- Operational risk
- Vendor/supplier concentration risk (Correct answer)
- Regulatory compliance risk
- Foreign exchange risk
Correct answer: Vendor/supplier concentration risk
Reliance on a single vendor creates vendor concentration risk, which can disrupt operations and budgets if the contractor fails to deliver.
Question 5: When Congress passes a continuing resolution (CR) instead of a full appropriations bill, what budget risk does this PRIMARILY create?
- Hyperinflation risk
- Operational and planning uncertainty risk (Correct answer)
- Foreign currency exposure risk
- Credit default risk
Correct answer: Operational and planning uncertainty risk
Continuing resolutions typically fund agencies at prior-year levels with restrictions, creating planning uncertainty and potential gaps in new program funding.
Question 6: Which of the following BEST describes a 'risk register' in the context of budget management?
- A legal document filed with the Treasury
- A comprehensive log cataloging identified risks, their likelihood, impact, and planned responses (Correct answer)
- A list of all contractors with performance bonds
- A monthly budget variance report
Correct answer: A comprehensive log cataloging identified risks, their likelihood, impact, and planned responses
A risk register is the primary documentation tool that captures all identified risks along with their probability, impact, owner, and mitigation strategies.
Question 7: A state agency sets aside 5% of its annual budget in an unobligated reserve account specifically for unexpected cost overruns. This is an example of:
- Fraud prevention
- Risk transfer
- Budget contingency reserve (management reserve) (Correct answer)
- Sequestration compliance
Correct answer: Budget contingency reserve (management reserve)
Setting aside funds to cover unforeseen cost overruns is the definition of a budget contingency or management reserve, a key risk mitigation tool.
CBA Risk Management & Mitigation 2
A budget analyst identifies that a key federal grant funding 30% of the agency's operations may not be renewed.
Which risk response strategy is MOST appropriate?