The difference between management reserves and emergency reserves is as follows:
1. Contingency reserves.
1. The emergency reserve is managed by PM.
2. PM has emergency reserves at its disposal.
3. Contingency reserves are reserves to prepare for "known unknown risks" in the future.
4. The contingency reserve is part of the cost performance baseline and also belongs to the project budget.
2. Management reserves.
1. Management reserves are reserves that prepare for unknown and unknown risks that have been considered in advance.
2. The management reserve is managed by the sponsor or management.
3. To use the management reserve, PM needs to apply to the sponsor or management.
4. Management reserves are part of the project budget.
5. Management reserves are not part of the cost baseline.
6. Management reserves are not included in earned value calculations.
7. Management reserves are reflected at the end of the project.
8. The amount of management reserve depends on the management's judgment on risk. If there is no basis for estimation, the management reserve can be calculated as a certain proportion of the total cost (for example, 10%).
Contingency Reserve:
The contingency reserve is a reserve established in advance to deal with estimation errors, omissions and uncertainties that may occur during project implementation. Generally divided into budget reserves and management reserves. Its size depends on the "newness" of the project, imprecise time and cost estimates, technical issues, the size of scope changes, and unexpected problems. This reserve typically accounts for 1 to 10 percent of the total project budget.
Contingency planning is planning that enables project managers to identify key assumptions beyond their control and their probability of occurrence. So that when things don't go as planned, or an expected outcome doesn't materialize, there are backup strategies to make the project successful.
It is the basis of production, planning and control. This system reflects the storage and flow of various materials in a timely manner through accounting management of warehouses, cargo locations, and management of entry/exit types and entry/exit documents, providing a basis for production management and cost accounting.