According to the PMBOK Guide, specifically within the Perform Quantitative Risk Analysis process, Expected Monetary Value (EMV) is a statistical concept that calculates the average outcome when the future includes scenarios that may or may not happen (i.e., analysis under uncertainty).
* The Concept: EMV is used to quantify risks (both threats and opportunities) to determine the overall contingency reserve or to choose between different project paths using a Decision Tree.
* The Formula:
$$EMV = \sum (P \times I)$$
Where:
* $P$ = Probability of the outcome occurring.
* $I$ = Impact (the monetary value of the outcome).
* Calculation Method: You identify every possible outcome, multiply the monetary value (Impact) of that outcome by its probability of occurrence, and then sum all the results together.
* Opportunities are expressed as positive values.
* Threats are expressed as negative values.
Analysis of Other Options:
* A. Value of each... multiplied by probability: This describes the calculation for a single risk event, but it does not account for the total EMV of a project or a decision node, which requires the sum of all potential outcomes.
* B and D. Probability of non-occurrence: These are incorrect. Risk management calculations focus on the probability of the event actually happening ($P$). While the probability of non-occurrence ($1 - P$) exists, it is not the multiplier used to determine the expected value of the risk itself.