How does contingency differ from management reserve?

Contingency reserve and management reserve are two different types of reserves in project management related to risks and uncertainties.

• Contingency reserve

  • Intended for known risks that may occur in the project.
  • The size of the reserve is calculated based on risk analysis and included in the project plan.
  • Used to cover costs if known risks materialize.

• Management reserve

  • Intended for unforeseen, unknown risks and changes that were not considered in planning.
  • Usually controlled by the project's top management.
  • Used at the project manager's discretion for unforeseen situations.

Example: If there is a risk of delivery delay in the project, a contingency reserve is allocated for it. If a completely new problem arises that was not considered in the risks, a management reserve can be used to address it.