A Key Distinction Between a Risk Response and a Contingency

question 76

Multiple Choice

A key distinction between a risk response and a contingency plan is

• A) a risk response is established only for moderate risks while contingency plans are established for major risks.
• B) a risk response is part of the actual implementation plan and action is taken before the risk can materialize, while a contingency plan goes into effect only after the risk has transpired.
• C) a risk response is only effective when you are able to assess the likelihood of the risk and its impact on the project; all other risks are covered by contingency planning.
• D) a risk response is created by the project team and the project manager while the project manager and the customer agree on the contingency plan.
• E) a risk response is action that is the response to a risk once it has happened and the contingency plan is created by the customer if the risk response fails.

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Definitions:

Liquidity

The simplicity of turning an asset into cash without impacting its market value.

Money Market

A segment of the financial market where short-term financial instruments with high liquidity and short maturities are traded.

Float Motive

The rationale for holding money in transaction accounts to satisfy daily operational cash flow needs.

Liquidity

The ease with which an asset or security can be converted into cash without affecting its market price.