Question

Discuss the different types of Management Reserves and how EMV could aide in determing "how much" should go into a reserve, by reviewing PMBOK Guide, assigned readings. Decision trees can aide all in reviewing probable risks relating to project costs and monetary expenditures. See

Answer 1

Management Reserves

• Management reserve is kind of reserve which fund unforeseen events, these are not included in the performance measurement baseline, its usage will sometimes requires the involvement of the sponsor.
• it includes the amount depend on various items like the complexity of the project, ability to recognize customer nature and also project fund etc. Historical records plays important role in designing the management reserve. if you are developing particular type of product for the first time you need more reserve. in many of the cases, significant percentage of the total required project budget is allocated as management reserve like 5 or 6 percent of the total project budget.
• It is not a part of cost base line , But the manager management's permission to use the reserve.
• it is not estimated reserve , it is defined according to the organization's policy

how EMV could aide in determining "how much" should go into a reserve,

Expected monetary value is the technique is major part of Risk management, it is basically used in medium , large and complex projects, where you will be having enough resources and also cannot risk the failure of the project due to stakes are high. It is a statistical technique used to quantify the risk .

In order to find the EMV you need to calculate the impact and the probability of each event, once you have calculated this, you need to multiply impact and probability to get the EVM of each risk

Expected Monetary Value= Probability*Impact

once after calculating the EMV of all risks which are identified , you add them together

This will tell you how much money you need to keep for risk contingency budget account.

Decision Tree Analysis is the quantitative risk analysis technique, this technique helps you to find the best option from many available option, it is a graphical representation looks like tree so the name came as decision tree analysis. In this calculation you may need to determine the multiple choice and the probability of each occurring and the impacts. you may also need to find the Expected monetary value for the each event and select the best one.