Back to Scrum Risk Management

Risk-Cost Benefit Analysis

5 minutes 5 Questions

Risk-Cost Benefit Analysis is an evaluation methodology for balancing the potential cost of risk and mitigations against the potential benefit of risk taking. This is crucial for effective risk management, as it enables Scrum teams to weigh the potential losses against the possible gains. It strengthens decision-making and improves transparency during the risk management process.

Risk-Cost Benefit Analysis Guide

This guide will provide a comprehensive overview of Risk-Cost Benefit Analysis in the context of Scrum, why it's important, and how to answer related exam questions.
What it is: Risk-Cost Benefit Analysis is a process in which potential risks in a project or decision are identified and quantified against their potential benefits. The aim is to determine whether the potential outcomes outweigh the possible risks.
Why it's important: This form of analysis is extremely important as it helps in informed decision-making, ensuring optimal use of resources and minimizing adverse outcomes in any project.
How it works: It involves identifying potential risks, quantifying them, and then comparing the potential benefits. Scrutinized parameters could include time, cost, scope, and quality, among others. The process involves balancing costs against benefits essentially to ensure the project does not encounter severe losses.
Exam Tips:
1. Make sure you understand the concept thoroughly. Don't just memorize definitions, but understand how it works and is applied.
2. Practice questions as much as possible.
3. Be concise in your answers. Exam markers often prefer simplicity and clarity.
4. If a question asks for reasons why Risk-Cost Benefit Analysis is important, make sure to include points like effective resource allocation, informed decision-making and risk mitigation.
Note: It's crucial not only to understand what Risk-Cost Benefit Analysis is, but also be able to apply it in various practical scenario questions that may come up in the exam.

Test mode:
Start practice test
CSM - Scrum Risk Management Example Questions

Test your knowledge of Amazon Simple Storage Service (S3)

Question 1

The team wants to incorporate an expensive, but effective tool to mitigate a risk. As a ScrumMaster, how should you conduct risk-cost benefit analysis in that scenario?

Correct Answer: Compare the cost of the tool with the potential impact and savings from the risk mitigation.

The best approach in this scenario, as a Scrum Master, is to 'Compare the cost of the tool with the potential impact and savings from the risk mitigation.' This approach aligns with the principles of Agile and Scrum, which advocate for iterative development and value-driven delivery. It also ensures a cost-effective use of resources while addressing business risks effectively. The other answers are not as effective: - 'Purchase the tool regardless of the cost.' lacks a strategic vision as it doesn't consider the return on investment (ROI). - 'Reject the idea as it's too expensive.' is also unsuitable, it dismisses a possible solution without analyzing its potential benefits. - 'Buy the tool and increase the budget to cover its cost.' is not always possible as the budget may not be flexible. Again, this doesn't consider the potential benefits of the tool versus its cost.

Question 2

During a risk-cost benefit analysis, the team identifies a high-impact risk that has a low probability of occurrence. How should this risk be prioritized?

Correct Answer: The risk should be monitored closely and contingency plans developed

In a risk-cost benefit analysis, risks with high impact but low probability should be monitored closely and contingency plans should be developed. Ignoring the risk entirely due to its low likelihood is not advisable, as the high impact could be devastating if it does occur. Immediately allocating resources to mitigate the risk regardless of costs is also not the best approach, as it may divert resources from other important tasks and the low probability of occurrence may not justify the expense. Giving the risk the highest priority for mitigation efforts, even at the expense of other tasks, is also not optimal. The best approach is to monitor the risk closely, have contingency plans in place, and be prepared to act if the probability of occurrence increases.

Question 3

The Scrum team is considering the implementation of a new tool that will increase the cost but it is expected to minimize the risks. As the Scrum Master, how shall you perform a risk-cost benefit analysis?

Correct Answer: Evaluate the potential risk reduction against the potential cost increase, seeking input from all team members.

The best approach as a Scrum Master would be to 'Evaluate the potential risk reduction against the potential cost increase, seeking input from all team members'. This takes into account both factors of risk and cost, and includes team members in the decision thereby adhering to Scrum principles of team collaboration. The other answers are wrong: 'Going with the most expensive option, assuming that it will minimize the most risks' might lead to unnecessary costs and does not consider a balanced approach. 'Ignoring the risks and focusing on minimizing the costs' is not practical as it overlooks potential risks that could disrupt the project. And finally, 'Choosing the option with the minimal risk without considering cost implications' could lead to an overly expensive option being chosen without regards to budget limitations.

Go Premium

Certified ScrumMaster Preparation Package (2024)

  • 3861 Superior-grade Certified ScrumMaster practice questions.
  • Accelerated Mastery: Deep dive into critical topics to fast-track your mastery.
  • Unlock Effortless CSM preparation: 5 full exams.
  • 100% Satisfaction Guaranteed: Full refund with no questions if unsatisfied.
  • Bonus: If you upgrade now you get upgraded access to all courses
  • Risk-Free Decision: Start with a 7-day free trial - get premium features at no cost!
More Risk-Cost Benefit Analysis questions
10 questions (total)
Start 10 question test