![]() Project Risk 2: There is a %15 percent probability of the price of rental equipment increasing, which will cost $200,000.This will cause a delay in the project for 3 weeks and cost 100,000 USD. Project Risk 1: There is a %25 possibility of heavy rain.Suppose you are a project manager of a pipeline project and your project have some risks that may cause delay and cost overruns. The EMValue of this situation is – 5,000 USD + 4,500 USD = – 500 USD Now we will calculate the EMV of this situation. The possibility of risk is 10% and if it occurs you will lose 50,000 USD, on the other hand, the possibility of opportunity is 15% and if it occurs you gain 30,000 USD. However, you also identified an opportunity which increases the sales price. You are managing an IT project and identified a risk related to customer’s demand. Now we will calculate the EMV of this risk. The possibility of risk is 20% and if it occurs you will lose 10,000 USD. You are managing a software development project and identified a risk related to market demand. It is positive for opportunities (positive risks) and negative for threats (negative risks).įor better understanding, let’s take a look at below Expected Monetary Value Calculations. The result can be either positive or negative. In the case of having multiple risks, the EMV must be calculated for each of them separately. Then the probability x impact multiplication gives the EMV. Calculate the impact of each risk as a monetary value Calculate the probability of occurrence of each risk.Ģ. Expected Monetary Value (EMV) Calculation Stepsīelow are the steps to be followed to calculate the EMV of a circumstance.ġ. In that case, the cost of the impact will be 30,000 USD. For example, in a housing project you identified a risk that if there is excessive precipitation during the roof works, you will spend 30,000 USD to restore the roof. ![]() The impact is the cost that you will spend when the identified risk or event happens. Therefore, in this case, the probability of showing is three is 1/6. Probability refers to the possibility of occurrence of a condition or an event.įor example, if you throw the dice, there is a 1/6 chance of showing the number three. ![]() Expected monetary value calculation relies on measuring the probability and impact of each risk. ![]()
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