Thanks for the response Michael,
I re-read the reserve analysis section, and things make a little more sense (in theory). However, in practice, I'm still struggling.
I guess, in my example, EMV into the contingency reserve would not be the best option. Since the $5000 can only be used for this risk event (as per the rules of applying reserves to specifically identified risks), but will not cover the cost of the event, maybe it would be better to try and get the $100,000 put into the management reserve? If there are 5 other identified risk events like this, then maybe the management reserve is agreed to be $200,000 since the probability of each of the 5 risk events is low?
But my problem with this is that contingency reserves are for identified risks and management reserves are for unidentified risks, so that goes against PMBOK.
So, if this risk cannot be eliminated through risk planning, then the only way to be sure that you can deal with it if it does occur (despite its low probability) is to have $100,000 in the contingency reserve, which in itself, is not practical. So then do you accept this identified risk (with no contingency) and apply for a budget change if it occurs?
Thanks again,
Clint.