Task 3 PFMP Practice Questions (Page 1)

Questions 1–5

1. 1expert · hard

   A portfolio manager is monitoring a risk response that was designed to reduce the impact of a market downturn. The response involves diversifying the portfolio across multiple sectors. After six months, the diversification has not reduced the portfolio's correlation as expected. The portfolio manager must decide whether to continue, adjust, or abandon the response. What is the most appropriate action?

   • AAbandon the response and accept the market downturn risk.
   • BContinue the response, as diversification takes time to show results.
   • CAdjust the response by rebalancing the portfolio to achieve better diversification.
   • DReport the lack of progress to stakeholders and ask for their guidance.
   Reveal Solution Discussion Select an answer first
2. 2application · medium

   A portfolio risk response requires additional funding that was not included in the original budget. The portfolio manager must implement the response without delaying other portfolio components. What is the best course of action?

   • ARequest additional funding from the sponsor without considering other options.
   • BUse the portfolio's contingency reserve to fund the response.
   • CReduce the scope of the response to fit within the existing budget.
   • DDelay the response until the next budget cycle.
   Reveal Solution Discussion Select an answer first
4. 3expert · hard

   A portfolio manager is monitoring a risk response that involves a partnership with another organization. The partner is not meeting its commitments, and the response is becoming less effective. The portfolio manager must decide whether to continue the partnership, renegotiate, or find an alternative. What is the most appropriate action?

   • AContinue the partnership, as the partner may improve over time.
   • BTerminate the partnership immediately and find a new partner.
   • CReport the issue to stakeholders and let them decide the next steps.
   • DRenegotiate the partnership terms to better align with the response objectives.
   Reveal Solution Discussion Select an answer first
5. 4foundation · easy

   What is the primary purpose of communicating risk response status to stakeholders?

   • ATo ensure transparency and support informed decision-making
   • BTo satisfy regulatory requirements only
   • CTo hide negative information from stakeholders
   • DTo assign responsibility for risk response failures
   Reveal Solution Discussion Select an answer first
6. 5application · medium

   A portfolio risk response plan has been approved, and the portfolio manager must now execute it. The response requires reallocating resources from a lower-priority component to a higher-priority one. The lower-priority component's sponsor is resisting the change. What should the portfolio manager do first?

   • ARevisit the risk response plan to find an alternative that does not require reallocation.
   • BEngage the sponsor in a discussion to explain the strategic rationale and seek alignment.
   • CEscalate the issue to the portfolio governance board for a decision.
   • DProceed with the reallocation as planned, since the response plan was approved.
   Reveal Solution Discussion Select an answer first