To account for potential risks, project managers use Expected Monetary Value (EMV) analysis. EMV is calculated by multiplying the probability of a risk event by its potential impact and adding this to the base estimate.
Base estimate: 9 days, $3,000
Risk impact: 5 additional days, $1,000 extra cost
Probability of risk: 20% (0.2)
Calculations:
Time: 9 days + (0.2 * 5 days) = 9 + 1 = 10 days
Cost: $3,000 + (0.2 * $1,000) = $3,000 + $200 = $3,200
However, to ensure sufficient contingency, it's prudent to budget for the full potential impact:
Time: 9 days + 5 days = 14 days
Cost: $3,000 + $1,000 = $4,000
But since the risk has only a 20% chance of occurring, the EMV approach provides a balanced estimate:
Time: 9 days + 1 day (20% of 5 days) = 10 days
Cost: $3,000 + $200 (20% of $1,000) = $3,200
Therefore, the most accurate budget considering the risk is 10 days and $3,200.
This aligns with the CompTIA Project+ PK0-005 exam objectives under Domain 1.4: Given a scenario, perform risk management activities, which includes understanding and applying EMV analysis.
