Risk Management Temple Exam 2 Practice

Quantifying risk in monetary terms by expected value. EMV captures, on average, how much a risk event would cost if it could be repeated many times. It multiplies how likely the event is by how large the loss would be if it occurs, giving EMV = probability × potential financial impact. The probability is the chance the event happens (0 to 1) and the impact is the monetary amount of the loss. The other options mix in mitigation costs or divide by probability, which aren’t part of the standard EMV calculation. In practice, if you later consider mitigation, you’d adjust this value by subtracting mitigation costs or factoring in changes to probability/impact, but the basic formula remains probability times impact.