International Project Management Association (IPMA) Practice Exam

What method can directly mitigate cost and schedule risk?

1. Simulations

2. Reserves

3. Decision trees

4. Status reports

The correct answer is: Reserves

Reserves are a vital method for directly mitigating cost and schedule risk in project management. By setting aside a portion of the project budget and time specifically for unforeseen circumstances, reserves provide a financial and time buffer that can be used to address unexpected challenges. This practice allows project managers to handle risks without derailing the entire project, as they have allocated resources available for contingencies. While simulations, decision trees, and status reports are valuable tools in risk management, they serve different purposes. Simulations can model the potential outcomes of various scenarios, helping to understand risk exposure, but do not necessarily provide direct mitigation strategies. Decision trees help in analyzing choices and their possible consequences, but they also do not directly eliminate risk; rather, they inform decision-making. Status reports are essential for tracking progress and communicating project status, but they focus on reporting rather than proactively managing risk. Thus, reserves stand out as a direct and practical approach to managing cost and schedule uncertainty.