What is the relationship between Reserve Analysis and Risk Management
There are always risks involved in project management. PMI Certification Training explains that even with a solid Risk Management, there may still be additional costs or time requirements during a project. Reserve analysis is used to determine the reserve of a project. How does reserve analysis help me achieve my project goals? What are the two types reserve that should be considered?
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This article will discuss the relationship between risk management, estimation, and reserve analysis. We will also give examples of reserve analysis to help reduce the risk impact.
Why is Estimating Importantly Related to Risk Management?
While the project manager attempts to eliminate project risks through mitigating or transfer, there may still be risks. These risks need to be managed in a way that achieves the project’s objectives and goals. The extra costs and time required to overcome the risk must be considered during project estimation. These extra costs and times are called reserves. They are then analyzed during reserve analysis. This is why estimating must be linked to reserve analysis and risk management.
Let’s say that an activity takes 5 days. However, if there is a chance that the activity might be delayed by 2 days due to unforeseen circumstances, this should be considered during estimation. The estimates will determine the final schedule for the project.
Why is Estimating Important in a Project?
As discussed in the PMP course estimating will help you to identify risks and complete risk management. This will reduce the time and cost estimates. Because estimation involves taking into account possible risks that could cause an activity’s completion to take longer, they will be considered. Estimators will consider possible risks that could cause activity delays when estimating activity duration. This will help to identify risks.
Why is Risk Management Important?
Risk management saves money and time! This is very important. This is because you can evaluate any unexpected events that could occur during the project and take the appropriate actions. If there is a risk, you will be prepared and have a plan for responding to it. This will make the impact on your project less than if you were not prepared.
Let’s say that you are concerned that one of your project resource might resign. You know this and have asked your project resources to create a handover document that will include their activities, how they performed them, and keep it updated. If this happens, or the resource quits, a new member of the project team will be able easily to take over his activities. If you don’t make this kind of risk planning, your project resource could get confused about what to do once he starts the project.
What is Reserve Analysis?
If there are still risks after completing the risk management activities, project management must have a reserve fund to cover them. As we have said, it is impossible to transfer or mitigate all risks associated with a project. You might have reserves to cover risks and minimize the impact of them when they occur.
The reserve analysis technique is used by the project manager as well as the project team. Reserve analysis is used to manage projects more effectively. How does reserve analysis work? Even after the Estimate Activity Resources and Durations processes are completed, there may still be risks that the estimated cost or schedule could change. The reserve analysis assists the project manager in minimizing these risks.
Reserve Analysis: Two types of Reserves