Contingency Reserves

Correct Answer: Request management reserve funds from stakeholders

The best approach when a project is halfway complete and a significant risk occurs that was not previously identified would be the need to 'Request management reserve funds from stakeholders'. If the contingency reserve has been depleted, the project manager will need the management reserve, which is the amount set aside to respond to unforeseen risks, such as those not previously identified. As for the other options, 'Asking project team members to pay for the risk' is not professional or ethical and is generally against company policies. 'Ignoring the risk and hoping for the best' is also a bad choice. It's not proactive and can lead to a considerable negative impact on the project if the risk materializes. Finally, 'Firing the person responsible for not identifying the risk earlier' is not a solution to the current problem. Risks are inherent in each project, and it's the job of a project manager to manage risks, not to lay blame on others.

Correct Answer: Update the risk register and re-assess the contingency reserve

The best course of action when new risks are identified is to update the risk register. The risk register is a document where all details about the identified risks are recorded and maintained. By updating the risk register, the project manager ensures that all known risks are documented and can be reviewed and addressed appropriately. Updating the risk register also affords an opportunity to reassess the contingency reserve, which is a provision for unforeseen elements of cost within the defined project scope. The contingency reserve could change based on the new risks identified. Now, on to why the other options are less appropriate: Ignoring the risks because they were not identified during the risk planning phase is not a good practice in project management. Risks can arise at any time and they need to be addressed, not ignored. Immediately implementing risk mitigation strategies might not be the best initial approach. Each risk needs to be assessed and the proper response needs to be determined before actions are taken. Informing stakeholders and requesting additional funds could be premature. First, the project manager needs to assess the risks and determine the appropriate course of action, which may or may not require additional funding.

Correct Answer: Update the risk register, reassess the project risks and explore alternative risk mitigation strategies.

The best way to handle this situation is to 'Update the risk register, reassess the project risks and explore alternative risk mitigation strategies.' This is because contingencies are not the only solution to mitigate risks. There are other strategies such as avoidance, mitigation, transfer or acceptance. Thus, when a project sponsor informs that no more contingency reserves will be granted, the best course of action is to reassess the risks and come up with alternative strategies. The other responses: 'Ignore the sponsor's instructions and request more reserves.', 'Ask the team to work longer hours to cope with any potential risks.', and 'Stop work until more contingency reserves are made available.' are inappropriate. Ignoring the sponsor's instructions or stopping work are both unprofessional and could lead to challenges in the project. Asking the team to work longer hours could be possible but would not necessarily solve the problem, as it doesn't reduce or address the risks themselves.