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Contingency reserve tricky question.

Posted: Sun Sep 10, 2017 9:34 am
by nirajsys@gmail.com
Hello Group members,

Need advise on the question attached in the pic.

What's should be the correct choice?

Re: Contingency reserve tricky question.

Posted: Sun Sep 10, 2017 10:12 am
by manishpn
good question would let other attempt for a good discussion

Re: Contingency reserve tricky question.

Posted: Sun Sep 10, 2017 4:38 pm
by nirajsys@gmail.com
Contingency reserve are derived as a percentage of residual risk of overall project.hence I feel option c seems to be apt.

In the question,risk A has not occurred.So we could keep the reserve for future residual risks.

Pls advise.

Re: Contingency reserve tricky question.

Posted: Sun Sep 10, 2017 6:39 pm
by kushalks87
keep it for residual risks as these risks are the one which remain which we could not plan a risk response on

Re: Contingency reserve tricky question.

Posted: Mon Sep 11, 2017 5:56 am
by nazrulq
Let me try to give the answer in elaborate approach. Let's discuss what is a residual risk and secondary risk.
Residual Risks are the risks which remain after risk response. Now what is secondary risk! Secondary risk (Unknown is the risk after implementing risk response. These could be new risks. Those are not remaining risk.
On the question $8000 has been kept for risk A as a form of residual risk inform of the contingency reserve. Risk did n't happen.
There are probably time when they anticipate those risk. That time has been passed so the anticipated risk informs of residual risk did not happen but it does not mean its not going to happen or zero probability.
I would keep the fund as the residual risk rather transfer it to management reserve and tackle it when it happens (unknown- unknown). But in terms of cost saving, it could be transferred as management reserve and deal with unknown -unknown. Little confusing since the question is emphasizing on risks I would go for Residual Risk (Oprtion C).

Re: Contingency reserve tricky question.

Posted: Mon Sep 11, 2017 8:22 pm
by manishpn
nirajsys@gmail.com wrote:Hello Group members,

Need advise on the question attached in the pic.

What's should be the correct choice?


Correct option should be B

During the project as part of control risk process, PM does reserve analysis. this is to find out if contingency reserves are adequate it also deals with releasing contingency risk amounts if risk is not longer valid i.e. risk has expired, in this process PM also validates is contingency buffer is adequate at the time of evaluation

Re: Contingency reserve tricky question.

Posted: Tue Sep 12, 2017 4:15 am
by nirajsys@gmail.com
Agreed Manish.

Found it...Pg.225 of PMBOK under Reserve Analysis heading... clarifies that if a contingency buffer is not used ,due to risk not occuring,it should be removed from project budget.

Thanks.

Re: Contingency reserve tricky question.

Posted: Tue Sep 12, 2017 4:40 am
by nazrulq
Thanks ! Really interesting question!

Re: Contingency reserve tricky question.

Posted: Tue Sep 12, 2017 10:11 pm
by pmp_learner
Interesting question.. if it was not discussed here and would have appeared in exam , I would have confidently gone for Option C :( :( :( ..
Thanks for the explanation Manish and Neeraj for PMBOK reference.. Just another question out of curiosity.. When PM removes this from Contingency Reserve, where would that money go? I assume PM will not move towards Management reserve (MR) as MR is not managed by PM.

Thanks
Kavita



manishpn wrote:
nirajsys@gmail.com wrote:Hello Group members,

Need advise on the question attached in the pic.

What's should be the correct choice?


Correct option should be B

During the project as part of control risk process, PM does reserve analysis. this is to find out if contingency reserves are adequate it also deals with releasing contingency risk amounts if risk is not longer valid i.e. risk has expired, in this process PM also validates is contingency buffer is adequate at the time of evaluation

Re: Contingency reserve tricky question.

Posted: Wed Sep 13, 2017 2:47 pm
by komal
I have not seen any such definition in PMBOK if contingency reserved is not used for risk, eliminate it. Please share screen shot .

Re: Contingency reserve tricky question.

Posted: Wed Sep 13, 2017 8:42 pm
by manishpn
you will not find every question in exam which is covered by PMBOK.

You can refer to risk practice guide from PMI if you really want to dig into details, , even there this is no straight forward statement but one has to understand and derive from the practice guide content

Re: Contingency reserve tricky question.

Posted: Wed Sep 13, 2017 8:43 pm
by manishpn
pmp_learner wrote:Interesting question.. if it was not discussed here and would have appeared in exam , I would have confidently gone for Option C :( :( :( ..
Thanks for the explanation Manish and Neeraj for PMBOK reference.. Just another question out of curiosity.. When PM removes this from Contingency Reserve, where would that money go?
Money would go back to sponsor and he/she can use it for need of other projects
I assume PM will not move towards Management reserve (MR) as MR is not managed by PM.

Thanks
Kavita



manishpn wrote:
nirajsys@gmail.com wrote:Hello Group members,

Need advise on the question attached in the pic.

What's should be the correct choice?


Correct option should be B

During the project as part of control risk process, PM does reserve analysis. this is to find out if contingency reserves are adequate it also deals with releasing contingency risk amounts if risk is not longer valid i.e. risk has expired, in this process PM also validates is contingency buffer is adequate at the time of evaluation