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1. What is a reserve in an operational manager’s budget?
Extra funding that was not in the original budget and provided to an operational manager for use on a specific problem.
Unallocated money set aside by the operational manager to be used on risky or uncertain activities.
Money held by another organization or entity and used as collateral on loans being acquired by the operational manager.
2. What can be done to reduce the amount of reserves needed on a high risk project?
Accelerate the schedule to reduce the time required to do the project.
The level of reserves should not be reduced on a high risk project.
Implement risk mitigation actions until the risk is low.
3. In a functional department budget, how should you estimate the amount of money to set aside in reserve accounts?
Functional department budgets reserves are estimated based upon macro-economic indices provided by Finance.
Functional department budget reserves are estimated using recent experience (the last few years) within that account category.
Functional department budgets do not have reserve accounts.
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