PMI Risk Management Professional (PMI-RMP) — Question 117

A race director is planning a marathon with US$80,000 in upfront costs that will be offset by race fees. The remainder of the funds will be donated to a national charity. State law mandates that all money paid by the participants must be refunded if the race is cancelled for any reason.
Which of the following is the best example of a risk mitigation response?

Answer options

• A. Let the runners know the race will be cancelled only in the event of an emergency.
• B. Purchase an insurance policy covering up to US$85,000 in losses, at a cost of US$5,000, in the event the race is cancelled.
• C. Inform the charity that they will receive no funds should the race be cancelled.
• D. Charge the runners an additional amount to cover the US$80,000.

Correct answer: B

Explanation

Option B is the best risk mitigation strategy as it provides financial protection against potential losses due to cancellation. Options A and C do not address the financial risk, and option D does not guarantee that enough funds will be raised to cover the costs and does not mitigate the risk of cancellation.