A risk identified during project initiation materialized: the supplier discontinued software support for a required input. The project manager reserved contingency funds to allow continuation if this occurred. What should the project manager do?

The correct option is to inform the sponsor. The project manager had a contingency plan for this specific risk, which included reserving funds. However, the realization of a significant risk, especially one impacting a critical input, warrants immediate communication with the sponsor. The sponsor needs to be aware of the situation and the proposed solution (using contingency funds) to make an informed decision about the project's continuation or any necessary adjustments. Telling the team to stop work is premature and defeats the purpose of contingency planning. Asking the supplier to continue support or offering additional payment without sponsor approval is outside the project manager's authority and could lead to unauthorized expenditures.