You are the project manager of the GHE Project. You have identified the following risks with the characteristics as shown in the following figure.
How much capital should the project set aside for the risk contingency reserve?
A.
$142,000
B.
$41,750
C.
$23,750
D.
$232,000
Explanation:
Contingency reserves are estimated costs to be used at the discretion of the project manager to deal with anticipated, but not certain, events. These events are “known unknowns” and are part of the project scope and cost baselines. The contingency reserve is calculated by multiplying the probability and the impact for the risk event value for each risk event. The sum of the risk events equals the contingency reserve for the project. Note that Risk D is a positive risk amount.
Answer option B is incorrect. This value is the sum of the risk events if you did not include Risk D as a positive risk value.