PMI Risk Management Professional Practice Exam

What might indicate a need for contingency reserves in project planning?

1. Higher potential risks identified during qualitative analysis.

2. The engagement of stakeholders at initial stages.

3. Increased SME compensation demands.

4. A complete risk register.

The correct answer is: Higher potential risks identified during qualitative analysis.

The indication for the need for contingency reserves during project planning often arises from identifying higher potential risks through qualitative analysis. This process involves assessing risks based on their likelihood of occurrence and the potential impact they may have on the project's objectives. When a project manager identifies significant risks that could disrupt the project's progress or cost, it becomes necessary to allocate contingency reserves. These reserves serve as financial or time buffers to help manage unforeseen events or challenges, ensuring that the project can proceed smoothly despite potential interruptions. In this context, the identification of substantial risks acts as a trigger for setting aside specific resources to address those risks should they materialize. Essentially, the presence of higher potential risks signals that the project management team must prepare adequately to mitigate their effects, advocating for having contingency reserves as a proactive risk management strategy. While stakeholder engagement, compensation demands, or the existence of a complete risk register are important aspects of project management, they do not directly suggest that contingency reserves are needed. Stakeholder engagement focuses on relationships and communication, compensation demands deal with human resources and budget constraints, and a complete risk register is a tool that documents risks rather than a direct indicator of the necessity for reserves.