ACCA Performance Management (F5) Certification Practice Exam

What is the potential risk associated with an imposed budget?

1. It encourages too much participation from employees

2. It may lead to unrealistic financial goals

3. It could create discontent and resistance at lower levels

4. It focuses solely on revenue generation

The correct answer is: It could create discontent and resistance at lower levels

The potential risk associated with an imposed budget is that it could create discontent and resistance at lower levels within an organization. When a budget is imposed without sufficient input or buy-in from employees, it can lead to feelings of frustration and disengagement. Employees might feel that their insights and experiences—valuable information that could inform realistic budgeting—are not being valued. This lack of engagement can negatively impact morale and, ultimately, performance, as employees may not fully commit to achieving targets they did not help establish. Furthermore, when budgets are seen as top-down directives, they can generate a culture of compliance rather than one of collaboration and motivation. Employees may view the imposed budget rigidly, leading them to resist efforts to meet budgetary targets if they believe those targets are unrealistic or disconnected from the actual operational challenges they face. The other potential risks presented in the choices, while relevant to budgeting concerns, do not specifically capture the unique dynamic of employee relations and organizational culture that arises from a lack of participation in the budget-setting process. Such aspects are critical in maintaining a motivated workforce that is aligned with the organization's financial goals.