Hi Riaz,
I think when you do not have to allocate funds for contingency because there is no risk anymore recorded, those funds should undoubtedly be removed from the contingency and there are two possible scenarios:
You may reduce the cost baseline as you said, and return the funds to the organization that may use them for other resources external to the project. You may also allocate them to the management reserve, where they could be used for any unforeseen work that is within the scope of the project. In such a case, the project budget will not change because what was deducted from the contingency reserve is added to the management reserve.
You may keep the cost baseline unchanged, but distribute the funds to the contingency reserves related to the other risks identified.
That is my approach to the question, and I hope it can be helpful.