What is Expected Monetary Value (EMV)?
Expected monetary value converts an uncertain event into a single planning number: probability × impact. Threats carry negative EMV, opportunities positive; sum a project's risk EMVs and you have a rational basis for its contingency reserve.
The trap to understand: EMV is a portfolio number. A 10% chance of losing $1M has an EMV of −$100K, but if it happens, you lose the full million — EMV guides reserves and comparisons, not survival decisions. It also powers decision tree analysis.
Formula
EMV = probability × impact
Worked example
A construction PM prices three risks: 30% chance of a $200K soil problem (−$60K), 20% chance of a $50K permit delay (−$10K), 25% chance of finishing early for a $40K bonus (+$10K). Net EMV −$60K — and now the contingency reserve has arithmetic behind it instead of vibes.