Contingency reserve vs. management reserve

• Contingency reserve vs. management reserve 

both refer to money used to account for a risk that has triggered, there is a difference.

    Contingency reserve - This is your fund for “known-unknowns“. That means you’ve already identified the risk; you just don’t know how much it will impact your project. This can be estimated based on the sum of all of your risks’ expected values.
    Management reserve - This is for the “unknown-unknowns“. Basically, you didn’t even identify the risk until it has occurred. This may be derived from using percentage of the overall project budget.
   
http://pmsecrets.blogspot.com/2008/01/contingency-reserve-vs-management.html

• Contingency Reserve vs Management Reserve

Contingency Reserves: Contingency Reserve is the cost, or time reserve that is used to manage the identified risks or “known-unknowns” (known=identified, unknowns=risks). Contingency Reserve is not a random reserve, it is a properly estimated reserve t based on Expected Monitory Value (EMV), or Decision Tree Method.

Contingency Reserve is controlled by the project manager. He has the authority to use it when any identified risk occurs, or he can delegate this authority to risk owner, who will use it at appropriate time and informs the project manager at later stage.

Management Reserve: Management Reserve is the cost, or time reserve that is used to manage unidentified risks or “unknown-unknowns” (unknown=unknown, unknowns=risks). Management Reserve is not an estimated reserve, it is defined as per organization’s policy. For some organization, it is 5% of total cost, or time of the project and for some others – 10%.

Management Reserve is controlled by someone outside the project team, usually from the management. Every time, when an unidentified risk occurs, project manager has to take approval from the management to use this reserve.

Here discussion about the contingency reserve and management reserve finishes, but before we leave let us summarized all key points once again:

Contingency Reserve:

    used to manage identified risks
    estimated based on Expected Monitory Value (EMV), or decision tree method
    project manager has authority to use this reserve.

Management Reserve:

    used to manage unidentified risks
    calculated as a percentage of cost, or time of project
    required management approval to use this reserve.

http://pmstudycircle.com/2012/02/contingency-reserve-vs-management-reserve/#axzz29h4Sxbij