Question

Since EMV is the most widely used decision criteria, what are its advantages and disadvantages?

Answer 1

Advantages:

It gives you an average outcome of all uncertain events.

It helps you select the best decision with a backup of objective data.

It helps you calculate the contingency reserve.

It helps you with a make or buy decision during the procurement planning process.

It helps in decision tree analysis. Decision tree analysis is a graphical diagrammatic technique that helps you understand the problem and solution easily.

This technique does not require any costly resources, only the experts’ opinion.

Disadvantages:

This technique is usually not used in small and small-medium sized projects.

This technique involves experts’ opinions to finalize the probability and impact of the risk. Therefore, personal bias may affect the result.

This technique works well when you have a large number of risks because it helps spread the impact of the risks.

Sometimes you may miss the inclusion of positive risks, which may affect the final outcome.

While doing the expected monetary value your risk attitude should be neutral, otherwise, it may affect the calculation.

The reliability of this analysis is based on the data provided as input to this technique. Therefore the data quality assessment should be thoroughly performed.

Please give me a thumbs-up if this helps you out. Thank you!