Contingency reserve is a planned, additional pool of time or budget reserved in a project in case previously identified risks occur. It is a tool mainly used in a predictive approach, where planning is detailed and risk-based.

🔍 What is a contingency reserve?

A contingency reserve relates to risks that:

• have been identified during planning,

• have assigned probability and potential impact,

• are covered by a risk response plan.

🧰 What is the purpose of a contingency reserve?

📊 In budget:

It covers additional costs resulting from the materialization of known risks, e.g.:

• increased raw material prices,

• need to hire additional specialists,

• team overtime.

📅 In schedule:

It creates a time buffer in tasks threatened by delays, e.g.:

• equipment delivery,

• quality testing,

• activities dependent on external contractors.

📈 Examples of application
 

• 🧮 Financial: If analysis shows a 30% chance of a 10% material cost increase, the budget reserve is increased by 3% of the cost value.

• 🕒 Time: For a task lasting 5 days at risk of delay (e.g. equipment failure risk), a 1-day buffer can be planned as a contingency reserve.

⚖️ Contingency reserve vs. management reserve
 

🧭 Importance of a contingency reserve

In a well-managed project, a contingency reserve:

• increases resilience to anticipated disruptions,

• prevents budget or schedule overruns,

• strengthens the credibility of project plans,

• reduces team stress – the team does not work "just in time."

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