Reserve Analysis

Correct Answer: Identify risks, analyze probability and impact, establish contingency reserves, monitor usage

The best practice for reserve analysis follows a logical sequence of:

1. First, identify risks - you need to know what you're planning for
2. Analyze probability and impact - quantify the potential effects
3. Establish contingency reserves based on analysis
4. Monitor usage throughout project lifecycle

This sequence ensures a methodical, data-driven approach to reserve management.

Other approaches are less effective because:

Creating management reserves first puts the cart before the horse - you need risk analysis before determining reserves.

Setting up both types simultaneously lacks the structured analysis needed for proper allocation.

Starting with past projects and total reserves then splitting based on risk appetite oversimplifies the process and may not address current project-specific risks adequately.

The correct sequence emphasizes the importance of thorough risk identification and analysis before establishing reserves, ensuring they are properly sized and allocated for the specific project context.

Correct Answer: Evaluate the adequacy of existing contingency reserves to address activated risk responses

When risk triggers occur earlier than anticipated, the primary focus should be on evaluating the adequacy of existing contingency reserves to handle the activated risk responses. This is crucial because: 1. Early trigger activation means risk responses need to be implemented sooner than planned 2. The organization needs to ensure sufficient reserves are available to address these activated risks 3. The immediate concern is managing the current situation with existing reserves Why other answers are less suitable: Calculating EMV for all remaining risks is premature when dealing with active triggers that require immediate attention Reviewing historical data from similar projects would not help address the current situation of early-triggered risks Performing Monte Carlo simulation is too time-consuming when dealing with risks that have already been triggered and require immediate response The focus should be on addressing the activated risks using existing contingency reserves rather than performing new analyses or simulations.

Correct Answer: Allocate reserves proportionally based on risk exposure in each phase

Allocating reserves based on risk exposure in each phase is the most effective approach to reserve analysis because: Key reasons why this is correct: - It ensures that reserves are distributed proportionally to actual risk levels - It aligns with PMI's risk-based approach to project management - It allows for more precise risk response planning - It optimizes resource utilization by matching reserves to actual needs Why other approaches are incorrect: Equal distribution of reserves does not account for varying risk levels between phases, leading to potential over-allocation in low-risk phases and under-allocation in high-risk phases. Basing reserves solely on duration and complexity fails to consider actual risk events and their potential impacts, missing critical risk exposure factors. Stakeholder priority ranking is not a reliable metric for reserve allocation, as it may not correlate with actual project risks and could lead to inadequate risk coverage in critical phases.