Certified Professional Public Buyer (CPPB) Practice Test

Which category of risk relates to the possibility of not fulfilling contract terms?

1. Surety/liability risk

2. Proposal risk

3. Performance risk

4. Contractual risk

The correct answer is: Contractual risk

The category of risk that pertains to the possibility of not fulfilling contract terms is known as contractual risk. This type of risk arises when one party may not be able to meet the obligations stipulated in the contract, which can lead to a breach of contract. When parties enter into a contract, they assume certain responsibilities and expectations; therefore, any failure to deliver on these terms poses significant risks, both legally and operationally. Contractual risk encompasses various factors, including uncertainties in performance, compliance with terms, and financial implications that might arise from not fulfilling obligations. Understanding and managing this risk is crucial for public buyers to ensure that contractual agreements are upheld and that both parties are protected against potential disputes or losses. The other options represent specific types of risks that do not directly relate to the general potential of failing to meet contract terms. Surety/liability risk pertains to the guarantees provided by sureties and the potential for financial liability. Proposal risk involves uncertainties related to the bidding and proposal process itself, rather than the execution of a contract. Performance risk focuses more on the execution of the contract and the quality of deliverables rather than the overall fulfillment of the terms.