Expected Monetary Value (EMV) is a decision-making tool used in risk management to calculate the average outcome when the future includes scenarios that may or may not happen. It is determined by multiplying the monetary value of each possible outcome by its probability and summing these products, aiding in choosing the most financially beneficial option under uncertainty.

Expected Monetary Value

decision-making tool

Risk management involves identifying, assessing, and prioritizing risks followed by coordinated efforts to minimize, monitor, and control the probability or impact of unfortunate events. It is essential for ensuring that an organization can achieve its objectives while safeguarding its assets and reputation against potential threats.

risk management

average outcome

possible outcome

Probability is a mathematical framework for quantifying uncertainty, allowing for the prediction of the likelihood of different outcomes in random processes. It is foundational in fields such as statistics, finance, and science, providing tools to model and infer patterns from data and random events.

probability

financially beneficial option

scenarios that may or may not happen

Uncertainty refers to the lack of certainty or predictability in outcomes, often arising from incomplete information, complex systems, or inherent randomness. It plays a critical role in decision-making, risk assessment, and scientific modeling, necessitating strategies to manage and mitigate its effects.

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