PMI Risk Management Professional Practice Exam

What is the best use of funds for known risks?

1. Plan a response even if the risk is unlikely and the cost exceeds the benefit.

2. Plan a response even if the risk is unlikely, except when the cost exceeds the benefit.

3. Develop fast, improvised response capability rather than planning for unlikely risks.

4. Plan a response only if the risk is likely and the benefits exceed the cost.

The correct answer is: Plan a response even if the risk is unlikely, except when the cost exceeds the benefit.

The best course of action for managing known risks is to plan a response even if the risk is unlikely, as long as the cost of planning does not exceed the anticipated benefits. This approach balances the need for proactive risk management with a practical consideration of resource allocation. By planning for known risks, project managers can ensure that even lower probability events are addressed without incurring excessive costs. When risks are identified, it's crucial to have a plan in place to mitigate their impacts if they do occur. This is particularly important because some risks, even if considered unlikely, could result in significant consequences. If the cost of the response outweighs the benefits, that scenario would warrant a reconsideration of the planning efforts. However, failing to plan for a known risk entirely could leave an organization unprepared, leading to potentially larger losses if that risk were to materialize. Thus, maintaining a focus on both the likelihood and the impact, as well as the costs and benefits of responses, is essential in effective risk management.