Finding the Expected Monetary Value

The expected monetary value (EMV) of a project or event is based on the probability of outcomes that are uncertain. For example, one risk may cost the project an additional $10,000 if it occurs, but there's only a 20 percent chance of the event occurring. In its simplest form, the expected monetary value of this individual risk impact is, thus, $2,000. Project managers can also find the expected monetary value of a decision by creating a decision tree.

Table 11-1 is an example of a simple risk matrix that determines the expected monetary value for some sample risks. Note that the sum of the EMV reveals what the contingency reserve for these risks should be.

Project Management Made Easy

Project Management Made Easy

What you need to know about… Project Management Made Easy! Project management consists of more than just a large building project and can encompass small projects as well. No matter what the size of your project, you need to have some sort of project management. How you manage your project has everything to do with its outcome.

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