One of your component managers came to you to tell you about a risk affecting his component that will badly impact the component and might affect the portfolio. After assessment, the risk turned out…

Question

Options

• AInform him to submit a change request to raise the component contingency because of this risk
• BInform the component manager to add the risk to the risk register and follow up on it closely
• CInform the component manager to add the risk to the risk register, assign a senior risk owner to it
• DInform him that he does not need to worry, you will have a risk contingency reserve for his risk at

• A
  8% (4)
• B
  14% (7)
• C
  4% (2)
• D
  75% (38)

Explanation

In portfolio risk management, risks with low probability but high impact are typically addressed at the portfolio level through a risk contingency reserve rather than at the component level. Because the probability is low, it is not cost-effective for the component manager to take active mitigation actions; however, because the impact is high, the portfolio manager must be prepared to absorb the consequences if the risk materializes. Maintaining a portfolio-level contingency reserve is the standard approach for handling these types of risks. This also avoids burdening the component with a change request (Option A) or over-assigning resources to a low-likelihood event.

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