Expected monetary value turns uncertain outcomes into a single figure. A risk with a 20% chance of costing $50,000 has an EMV of −$10,000. Adding all risks gives a sensible contingency reserve for a project.
How to use the EMV Calculator – Expected Monetary Value
- Risk 1 – probability
- Risk 1 – impact
- Risk 2 – probability
- Risk 2 – impact
- Risk 3 – probability
- Risk 3 – impact
- Risk 4 – probability
- Risk 4 – impact
- Risk 5 – probability
- Risk 5 – impact
Results update as you type, and every field accepts the units shown in its menu.
How it works
Enter the probability and the impact of each risk (negative for a cost, positive for a gain).
Tips
- Use figures for the same period (a month, a quarter or a year) for every input so ratios compare like with like.
- Track the metric over time – the trend usually tells you more than a single value.
- Compare your result with industry benchmarks, which vary a lot between sectors.
- Treat the result as a starting point for a decision, then check the assumptions behind each input.
Common mistakes to avoid
- Mixing monthly and yearly numbers in the same calculation.
- Using revenue where the formula needs profit (or the other way round).
- Forgetting hidden costs such as taxes, fees, overheads or your own time.
Inputs explained
| Field | What to enter |
|---|---|
| Risk 1 – probability | In % |
| Risk 1 – impact | Amount in your currency |
| Risk 2 – probability | In % |
| Risk 2 – impact | Amount in your currency |
| Risk 3 – probability | In % |
| Risk 3 – impact | Amount in your currency |
| Risk 4 – probability | In % |
| Risk 4 – impact | Amount in your currency |
| Risk 5 – probability | In % |
| Risk 5 – impact | Amount in your currency |
What each result means
- Expected monetary value = ([Risk 1 – probability]×[Risk 1 – impact] + [Risk 2 – probability]×[Risk 2 – impact] + [Risk 3 – probability]×[Risk 3 – impact] + [Risk 4 – probability]×[Risk 4 – impact] + [Risk 5 – probability]×[Risk 5 – impact])÷100
- Expected cost of threats = ([Risk 1 – probability]×min([Risk 1 – impact], 0) + [Risk 2 – probability]×min([Risk 2 – impact], 0) + [Risk 3 – probability]×min([Risk 3 – impact], 0) + [Risk 4 – probability]×min([Risk 4 – impact], 0) + [Risk 5 – probability]×min([Risk 5 – impact], 0))÷100
- Expected value of opportunities = ([Risk 1 – probability]×max([Risk 1 – impact], 0) + [Risk 2 – probability]×max([Risk 2 – impact], 0) + [Risk 3 – probability]×max([Risk 3 – impact], 0) + [Risk 4 – probability]×max([Risk 4 – impact], 0) + [Risk 5 – probability]×max([Risk 5 – impact], 0))÷100
- Suggested contingency reserve = max(-[Expected monetary value], 0)
Example values
How the main result changes when Risk 1 – probability changes and everything else stays at the example values above:
| Risk 1 – probability (%) | Expected monetary value |
|---|---|
| 10 | -6,200 |
| 15 | -8,700 |
| 20 | -11,200 |
| 25 | -13,700 |
| 30 | -16,200 |
| 40 | -21,200 |
Formula
EMV = Σ (probability × impact)Threats are entered as negative impacts, opportunities as positive impactsWorked example
Inputs — Risk 1 – probability: 20 %; Risk 1 – impact: $-50,000; Risk 2 – probability: 35 %; Risk 2 – impact: $-12,000; Risk 3 – probability: 10 %; Risk 3 – impact: $30,000; Risk 4 – probability: 0 %; Risk 4 – impact: $0; Risk 5 – probability: 0 %; Risk 5 – impact: $0.
Results — Expected monetary value = $-11,200.00; Expected cost of threats = $-14,200.00; Expected value of opportunities = $3,000.00; Suggested contingency reserve = $11,200.00.
Frequently asked questions
What is expected monetary value?
The probability-weighted average outcome of uncertain events.
Should threats be negative?
Yes – enter costs as negative numbers and gains as positive.
Is EMV the amount I will lose?
No – it is an average; any single risk either happens in full or not at all.
What formula does the EMV Calculator – Expected Monetary Value use?
EMV = Σ (probability × impact).