Reserve Analysis

Correct Answer: Use the time-related contingency reserve to cover the delays

The reserve analysis is used in project management to address uncertainties that may impact the project. There are two types of reserves: 'contingency reserves' (addressing the 'known-unknowns') and 'management reserves' (addressing the 'unknown-unknowns'). The time-related contingency reserve is specifically set aside to deal with schedule uncertainties such as project delays. Therefore, in this case, the project manager should use the time-related contingency reserve to cover the delays. The other answers are not the best approach. Asking the project sponsor to provide an additional budget addresses financial, not time-related issues, thus it's not directly applicable here. Using the management reserve to cover the delays is not the most appropriate solution - management reserves are typically used for unplanned situations that may occur (the 'unknown-unknowns'), not for known issues such as delays. Lastly, forcing the team to work overtime is not advisable as it can lead to burnout and lowered quality of work.

Correct Answer: Redistribute the management reserve to cover the additional costs

In project management, reserve analysis is a technique often utilized for managing potential costs and risks during the course of a project. Typically in a project, there are two types of reserves set aside - Contingency reserves and Management reserves. Contingency reserves are designed to handle 'known risks' or foreseeable costs in a project. Management reserves, on the other hand, are for 'unknown risks', essentially unforeseen expenses that can arise during a project, such as the estimated costs for materials increasing significantly. Hence, the most fitting way for the project manager to address this situation would be to 'Redistribute the management reserve to cover the additional costs'. Regarding the three other answers: 'Requesting additional budget' is not appropriate as the increase in material cost is an unknown risk and should be covered by the management reserve. Requesting additional budget should be the last conviction when all reserves are exhausted and still don't cover the cost overrun 'Increasing the contingency reserve' is not valid because contingency reserve is set aside for known risks, which does not apply in this case since the increase in material costs was unforeseen or an unknown risk. 'Reallocating resources' involves the shifting of resources from one activity of the project to another, which does not resolve the increased cost issue, it's more of a time corrective action rather than cost coverage.

Correct Answer: Sum of risks' impact multiplied by probability

The best way to calculate the project's contingency reserve using reserve analysis is by the sum of the risks' impact multiplied by their probability. This is known as expected monetary value analysis in risk management, which quantifies the risks in monetary terms. In contrast, multiplying sum of risks' probability by project budget or just considering the sum of risks' impact will not give a true representation of the risks because it does not consider both the likelihood and the impact of the risks. Finally, dividing the sum of risks' impact by their probability would give an incorrect value as risk exposure is determined by multiplying the two factors, not dividing.