PMI Risk Management Professional Practice Exam

Which risk management technique helps provide early warnings for sponsor communication?

1. Qualitative analysis

2. Contingency planning

3. Reserve analysis

4. Risk transfer

The correct answer is: Reserve analysis

The technique that helps provide early warnings for sponsor communication is reserve analysis. This method involves determining the amount of contingency reserves required for identified risks in a project. By examining the reserves, project managers can analyze trends and patterns in risk occurrence and potential impact, thereby enabling them to communicate effectively with sponsors. When reserve analysis is conducted, it highlights potential cost overruns or schedule delays associated with risks, allowing for timely discussions with sponsors about risk exposure and management strategies. This proactive communication is essential for ensuring that all stakeholders are informed and aligned on the status of risks and the implications for project success. In contrast, the other mentioned techniques focus on different aspects of risk management: qualitative analysis prioritizes risks based on their likelihood and impact but does not inherently provide a structured approach for early warning communication. Contingency planning addresses specific actions to take if risks materialize but does not facilitate real-time updates to sponsors. Risk transfer involves shifting the risk to another party and might not provide early warnings about potential impacts on the project timeline or budget.