When establishing a contingency reserve, including time, money and resources, how is the risk being...

According to the PMBOK® Guide, specifically within the Plan Risk Responses process, establishing a contingency reserve is the primary method for Active Acceptance of a risk.

Risk Acceptance: This strategy is adopted when the project team decides not to change the project management plan to deal with a risk, or is unable to identify any other suitable response strategy.

Active vs. Passive Acceptance:

Passive Acceptance requires no action except periodic review of the risk.

Active Acceptance involves establishing a contingency reserve, which includes allocated time (buffer), money (contingency fund), or resources to handle the impact of the risk should it occur.

Contingency Reserves: These are part of the cost baseline and schedule baseline. they are intended to address " known-unknowns " (identified risks for which a proactive response is not feasible or cost-effective).

Why other options are incorrect:

B. Transferring: This involves shifting the impact and ownership of a threat to a third party (e.g., buying insurance or using a performance bond). It usually involves paying a risk premium and does not involve setting aside your own reserves.

C. Avoiding: This involves changing the project management plan to eliminate the threat entirely (e.g., changing the scope to avoid a risky activity). If a risk is avoided, a contingency reserve is not needed because the risk no longer exists.

D. Mitigating: This involves taking proactive steps to reduce the probability and/or the impact of a risk. While mitigation reduces risk, the act of specifically setting aside a reserve to " pay for " or " absorb " the risk as-is is defined by PMI as acceptance.