What is the definition of management reserve?

Management reserve refers to the budget that is set aside to address unforeseen circumstances or changes in scope that may arise during the project execution. This reserve is not allocated to any specific line item in the project budget and is typically used for unexpected expenses that can affect the project's overall budget.

In project management, keeping a management reserve is crucial because it helps ensure that the project can absorb unexpected costs without jeopardizing its financial viability. This reserve is often contingent upon the project's risk assessment, allowing project managers to have financial flexibility in response to risks that materialize.

The other options describe different financial concepts. The available budget for planned improvements is more aligned with programmatic funding rather than unforeseen events. Funds specifically for risk management activities are generally considered a separate line item in the budget rather than part of the management reserve. Finally, excess budget from previous phases is not retained specifically to handle unforeseen circumstances in the current phase of a project but could potentially be allocated elsewhere.