Risk Management Professional Exam Prep

Answer: A, D - The two main types of reserves are management and contingency.

Contingency is tied to risks identified (“If X event occurs, a certain amount can be taken out of reserve to deal with it”). We frequently find this is effective to protect against needing to replace a key member of the team or an unforeseen event (a New England snowstorm). A management reserve is a discretionary account that is typically set aside in budgeting, but not included in the baseline for a variety of events that might occur to affect the project adversely.

Key takeaway: These reserves are a key part of both risk and cost management. It’s much easier to have one structured and written in early in the project than to have to go to senior management asking for it later.