Risk Management & Mitigation Flashcards
7 cards from real CBA practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 Risk Management & Mitigation flashcards as text
Under OMB Circular A-11, agencies are required to include which of the following in their budget submissions to address financial risk?
Answer: Performance goals and evidence of program effectiveness
OMB Circular A-11 requires agencies to link budget requests to performance goals, providing evidence that funds will be used effectively and risks are managed.
What is the PRIMARY difference between a 'risk mitigation' strategy and a 'risk avoidance' strategy?
Answer: Mitigation reduces the likelihood or impact of a risk; avoidance eliminates the risk by not pursuing the risky activity
Mitigation reduces a risk's probability or impact, while avoidance eliminates the risk entirely by choosing not to undertake the activity that creates it.
An agency's budget analyst discovers that personnel costs have exceeded projections for three consecutive quarters. Which mitigation action is MOST appropriate?
Answer: Adjust the budget forecast, identify root causes (e.g., overtime, vacancies), and brief leadership
Recurring variances require revised forecasts, root cause analysis, and leadership briefing to enable informed corrective action before the situation worsens.
The concept of 'risk appetite' in government budgeting refers to:
Answer: The level of risk an organization is willing to accept in pursuit of its objectives
Risk appetite defines how much uncertainty or potential loss an organization's leadership is willing to tolerate when pursuing its mission and budget goals.
Which scenario BEST illustrates 'residual risk' after a mitigation strategy has been applied?
Answer: The remaining risk exposure that persists even after mitigation measures are implemented
Residual risk is the level of risk that remains after controls and mitigation efforts have been applied; it can rarely be reduced to zero.
In budget risk analysis, 'sensitivity analysis' is used to:
Answer: Determine how changes in key assumptions (e.g., inflation, enrollment) affect budget outcomes
Sensitivity analysis tests how much a budget outcome changes when one key input variable is altered, identifying which assumptions carry the most financial risk.
A budget analyst at a federal agency wants to protect against the risk of inflation eroding the real value of multi-year project appropriations. Which approach is MOST effective?
Answer: Build inflation escalation factors into multi-year cost estimates and budget requests
Incorporating inflation escalation factors (e.g., using price indices) into multi-year cost estimates protects against purchasing power erosion over the project lifecycle.