Management reserves account
for "unknown unknowns" (or
simply "unknows"). These are
items you did not or could not
identify in risk management. This
are estimated. (e.g., 5 percent of
the project cost), and then these
reserves are added to the cost
baseline to get the project budget.
To use management reserves is
needed the manager approval
contingency reserves account for
"known unknowns" (or simply "knows").
Items identified in risk management, are
calculated and become part of the cost
The Project manager can approve use
of the contingency reserves
No matter what you do, risks will
remain in the project, and there should
be a time or cost allotment for them,
just as cost or time is allotted to work
activities on the project.