EMV Question

Submitted by san on Wed, 05/15/2013 - 12:45

As part of Quantitative Risk Analysis, a project manager has derived four packages with the following probability and impact. Using EMV (Expected Monetary Value) which one should he use in the project?
A) Work package I : Probability 15 % & Impact $ 20,000
 B)Work package II: Probability 7 % & Impact $ 10,000
  C) Work package III: Probability 7 % & Impact $ 15,000
  D)Work package IV: Probability 15 % & Impact $ 10,000

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rwmv

Wed, 05/15/2013 - 12:53

 Answer-A

crushPMP's picture

crushPMP

Wed, 05/15/2013 - 12:55

 A

Jgrind07

Wed, 05/15/2013 - 15:37

A

y0zh

Wed, 05/15/2013 - 19:23

Impact can be either positive or negative. Since this impact is positive, its some e.g. Profit, cost saving. Thus the bigger PxI the better

cnppmp's picture

cnppmp

Thu, 05/16/2013 - 09:49

3000 is for A so it is biggest and so choose it, sicne it is positive 3000.


Regards


CN Patil

BK

Thu, 05/16/2013 - 10:26

 

 I am bit confused here.

Higher P X I value signifies higher risk (Can be threat or opportunity), then why we go with option 1?

then the option should be B, the lowest value/lowest risk.

 

@san,

what is the clarification/ans given by the provider?

 

 

 

 

sspawar

Thu, 05/16/2013 - 12:12

 here amount shown as positive value hence it is opportunity aand higher one is A

san

Thu, 05/16/2013 - 12:18

 

Explanation:

Answer (b) Work package II: Probability 7 % & Impact $ 10,000 with EMV of $700 has the lowest value. EMV(Expected Monetary Value )= Probability * Impact. Lower the ExpectedMonetary Value (EMV), lower is the risk involved in the work package.

I am confused between A and B. Please clarify..

 

Thanks