While preparing your risk responses, you realize that you have not planned for unknown risk events. You need to make adjustments to the project to compensate for unknown risk events. These…

Question

Options

• AInclude a management reserve in the budget to try to compensate for the unknown risks, and
• BDocument the unknown risk items and calculate the expected monetary value based on
• CDetermine the unknown risk events and the associated cost, then add the cost to the project
• DWith the stakeholders, determine a percentage of the known risk budget to allocate to a

• A
  72% (34)
• B
  17% (8)
• C
  9% (4)
• D
  2% (1)

Explanation

Management reserve exists precisely for unknown risk events ("unknown unknowns") - funds held outside the project cost baseline, controlled by management, and sized based on historical experience with similar projects. Since these risks are unidentifiable by definition, past experience is the only rational basis for estimating the buffer needed, making A the correct action.

B is wrong because Expected Monetary Value (EMV) requires you to identify a risk event and estimate its probability and impact - that's only possible for known risks, not unknowns you haven't identified yet.

C is wrong for the same fundamental reason: you cannot "determine" unknown risk events. Attempting to do so turns them into known risks, which would then use contingency reserves, not a separate unknown-risk buffer.

D is wrong because carving a percentage out of the known risk (contingency) budget conflates two separate reserve types - contingency is earmarked for identified risks and shouldn't be diluted to cover unknowns.

Memory tip: Think of the two reserve types as two wallets - Contingency reserve (your wallet) covers known risks you've identified; Management reserve (the manager's wallet) covers unknown risks, and only management can approve spending it. If you can name the risk, it's contingency; if you can't, it's management reserve.

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