A project manager faces a risk with three possible outcomes: a 20% chance of a $50,000 loss, a 40% chance of a $30,000 loss, and a 10% chance of an $80,000 loss (the remaining probability results in no impact). What total contingency reserve should be set based on expected monetary value (EMV)?

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$30,000. EMV = Σ (probability × impact). = (0.20 × 50,000) + (0.40 × 30,000) + (0.10 × 80,000) = 10,000 + 12,000 + 8,000 = $30,000. Summing the raw impacts ($160,000) ignores probability and is the common error.

A project manager faces a risk with three possible outcomes: a 20% chance of a $50,000 loss, a 40% chance of a $30,000 loss, and a 10% chance of an $80,000 loss (the remaining probability results in no impact). What total contingency reserve should be set based on expected monetary value (EMV)?

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