I also had issue with this question as well.
A project budget risk was approved that only considered high-impact/high-potential risks. During project execution, a risk with high impact but very low potential occurs. While it is in the risk register, it is not in the budget. What should the PM do first?"
Escalate to sponsor
Execute risk response using available risk budget
Conduct an impact analysis, and then submit a CR to increase budget if necessary
Update the Risk management plan based on risk monitoring and assessment is identified as the answer.
Please advise if it's ok to post this information, I don't mean to infringe or engage in any copyright violations. I can modify the details to give simpler context.