Question: You are managing a construction project. You have just been intimated that it is likely to rain heavily during the next week. This can delay your project by a week and you will miss a deadline. This risk will cost you a potential impact of $50,000 if it happens. The probability of the occurrence of this risk is 75%. What is the expected value for this risk?
Hint: Calculate the expected value by EMV formula. Also note that threats are treated as negative numbers.
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Explanation: EMV for a risk is calculated by multiplying the value of its impact by its probability of occurrence. This will result in 75% * -$50,000 = -$37,500.