Risk Reserve and Management reserve

There are two concepts worth mentioning in project management. One is called the "Risk reserve " and the other is " Management reserve " (Management reserves). Reserve What? Not food, not matter, nor ammunition, but money or capital.

Why reserve? Because projects are risky, budgets are often overrun, and the less experienced people are, the less familiar the project is, the easier it is to exceed the budget, and often more than a few, from 30% to 70% or more. So to reserve.

We are familiar with the risk reserve. To do a project, start with a plan, and the budget is an important part of the project plan, telling people (leaders or investors) to tell themselves how much money you plan to spend. Before you finish budgeting for approval, you must do one more thing and add "unpredictable costs" to your budget. What is it? This is the risk reserve. How should the risk reserve be set? To see the situation. Many people write 5%-10% with their eyes closed, as long as the leader approves. The general principle is: the greater the uncertainty of the project, the higher the risk reserve. However, you can not get a lot, because in that case, they will scold you to do the budget is too poor, too unreliable. I feel that it is generally inappropriate to exceed 30%. And, when the budget is submitted for approval, there must be a good reason to be prepared, and that is the reason why, after careful analysis, you find that there are some factors that are objectively not controllable and therefore uncertain. As far as I know, there are some industry norms, corporate standards of what type of project, the proportion of risk reserves should be much, so it is more convenient. There is another problem: the budget has been approved, you have a risk reserve, how to use, when to use? Not immediately used, or not to use, risk reserves and contingency plans are supporting. The project has a negative situation, the risk signs appear, contingency plans to start, the risk of natural reserves will be used. In short, the project budget to consider the risk, one means is to list the risk reserves, but the risk reserves under normal circumstances (everything in the budget) is not used, should not be pretexts privately, should be used in parallel with the risk prevention measures.

risk reserves are insurance at the project level, sometimes not enough, and an organizational level of insurance, that is, management reserves . There are many projects in the organization, so there may be a portion of the reserve safekeeping, but this reserve is not for a particular project. For this reason, in some cases, you have to discuss with the organization, in addition to the risk of your project in the reserve, it is not possible to use the management reserve. Lead a research, think your opinion is reasonable, agree, then your project in the management reserve of the Organization to prepare a case. It must be pointed out: if the risk is stored under your control, in your pocket, the management reserve is usually not in your pocket, but in the pocket of the leader, not under your control, but under the control of the leader. Therefore, only the leaders can decide whether to use, when to use, or how much to use. Anyway, you have one more chance and a lot more protection.

Risk Reserve and Management reserve