Risk Management Professional Exam Prep

Answer: True - The seller must complete the project in such a manner to achieve the incentive fee in this case. There is more variation in these incentives usually, which means there is more risk.

Key Take Away: In this case, increased risk can mean reward. Imagine a contract where the vendor is rewarded per day that the project is completed early. While there might be variation and thus “risk” in when the project is completed, the earnings could be substantially higher than just a fixed fee for project complete.