Final answer:
Management reserve is for unidentified risks, while contingency reserve is for identified risks.
Step-by-step explanation:
Management reserve and contingency reserve are both financial concepts related to planning for unexpected events or expenses. However, there are important differences between them:
- Management Reserve: This is an amount of money set aside specifically for the project manager to use at their discretion. It is typically included in the overall budget and is intended to address unidentified risks or uncertainties that may arise during the project. The management reserve provides flexibility to the project manager to deal with unexpected situations without requiring formal approval.
- Contingency Reserve: This is also an amount of money set aside for unexpected events or expenses, but it is specifically allocated to address identified risks or uncertainties. It is based on a systematic analysis of potential risks and is typically included in the project budget as a line item for specific identified risks. The contingency reserve is intended to be used only if those specific risks materialize.