Expected Monetary Value (EMV)

Expected Monetary Value (EMV) is a decision-making tool used in risk management and project evaluation to calculate the average outcome of uncertain events by considering all possible scenarios and their associated probabilities and monetary values. EMV is calculated by multiplying the monetary impact of each potential outcome by its probability and summing the results. EMV helps businesses and investors assess the financial implications of risks and make informed decisions under uncertainty. EMV is widely used in project management, insurance, finance, and other fields where understanding potential gains or losses from various scenarios is crucial.

Example

A project manager calculates the EMV of a project by considering both potential profits and losses under different market conditions to decide whether to proceed.