Expected Monetary Value quantifies risk impact by multiplying probabilities with potential outcomes. It aids in resource allocation and risk mitigation, providing a clear basis for strategic decision-making. EMV analysis enhances product planning, especially for large projects, contributing to resilience and financial soundness.
Methodology:
- AIdentify risks and opportunities,
- Estimate probabilities,
- Determine the monetary impact,
- Calculate the Expected Monetary Value for each risk or opportunity,
- Summarise the Expected Monetary Values,
- Analyse results,
- Develop risk response strategies,
- Monitor and review.
Benefits:
- Enhances decision-making under uncertainty,
- Supports proactive risk management,
- Facilitates better resource allocation.
Limitations:
- Dependency on accurate probability and impact estimates,
- May not capture non-monetary factors,
- Oversimplification of complex decisions.