PMI Risk Management Professional Practice Exam

What is the expected monetary value (EMV) for mitigating a risk of scope creep with an associated cost of US$80,000?

1. EMV of US$12,000 for mitigating the risk

2. EMV of US$12,000 for accepting the risk

3. EMV of -US$20,000 for mitigating the risk

4. EMV of -US$4,000 for accepting the risk

The correct answer is: EMV of -US$20,000 for mitigating the risk

To determine why the expected monetary value (EMV) for mitigating the risk of scope creep is calculated as -US$20,000, it’s crucial to understand the concept of EMV in risk management. EMV is a quantitative risk analysis technique used to evaluate the potential impact of risks on a project by estimating the potential monetary outcomes and their probabilities. In the context of mitigating scope creep, there are typically associated costs, which in this scenario amount to US$80,000. If mitigation efforts are successful in significantly reducing the likelihood or impact of scope creep, there may be an associated EMV calculated for those costs. However, if the costs of the mitigation exceed the benefits accrued from avoidance of the scope creep risk, the result can produce a negative EMV. In this scenario, an EMV of -US$20,000 indicates that the cost of the mitigation strategy, when weighed against the anticipated benefits or the potential cost savings from avoiding scope creep, results in a net loss. This suggests that the selected mitigation strategy may not be beneficial, leading to a higher overall cost compared to not implementing the mitigation efforts. To summarize, the correct answer emphasizes that when calculating the EMV of mitigating risks, one must consider all associated costs and the