Contingency Reserve
DE: Risikoreserve
Budget or time set aside for identified risks with response strategies.
Detailed Explanation
A contingency reserve is budget or time within the baseline for identified risks with active response strategies. It addresses 'known unknowns' — risks identified but with uncertain impact.
Unlike management reserves (held above the baseline for 'unknown unknowns'), contingency reserves are part of the baseline and controlled by the PM. Size is typically determined via EMV, Monte Carlo simulation, or expert judgment.
As risks resolve or materialize during execution, the reserve should be reviewed and adjusted. Unused reserves are released at project closure.
Key Points
- Addresses known unknowns — identified risks
- Part of the cost baseline, controlled by PM
- Different from management reserves (unknown unknowns)
- Sized using EMV, Monte Carlo, or expert judgment
- Reviewed as risks resolve or materialize
- Released when no longer needed
Practical Example
A project identifies risk of a vendor delivering 3 weeks late (40% probability, EUR 30K impact). EMV = EUR 12K. Additional risks add EUR 38K. Total contingency reserve: EUR 50K within the EUR 500K baseline. The PM can use these funds when identified risks materialize.
Tips for Learning and Applying
Base calculations on quantitative analysis, not gut feeling
Track reserve usage and report regularly
Release unused reserves at closure — do not spend them just because they exist
Keep contingency and management reserves clearly separated
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